By Elizabeth G. Olson
FORTUNE -- As top-drawer New York law firm Dewey & LeBoeuf teeters on the edge, likely to fall from high-paid grace, its closely chronicled decline is providing a look into how the once genteel, clubby world of law firms has morphed into a risk-taking, entrepreneurial industry.
"Dewey may be an extreme example," says Robert Gordon, a Stanford Law School professor who is writing a book on the country's legal profession. "But it may also be an example of something that is happening a lot. Law firms have expanded at a greater rate than other businesses. Some have loaded on debt and made promises of compensation that they can't keep."
Most corporate law firms aren't on the skids, but they are being roughed up by the confluence of technology, employee-heavy structures, and corporate cost-cutters determined to lop off a sizeable chunk of their legal costs.
But airing it all in public, through the drip-drip-drip revelations about Dewey's departures and sky-high partner compensation, has laid bare a hustling legal culture. Firms are competing feverishly for lucrative corporate business, working against their counterparts by poaching profit-making partners through the cunning use of eye-popping salary guarantees. This behavior has essentially dismantled the traditional track to partnership, a seat that was usually won after years of in-house training and experience.
"Legal partnerships were brands that drew loyalty, but that changed when partners began to sell themselves to the highest bidder," says Brian Tamanaha, a law professor at Washington University Law School in St. Louis. "We still maintain the facade of being a profession. But when lawyers measure themselves against the highest-paid CEOs or the richest Americans, it's a pretense." More
|Bernanke's advice for college grads|
|The Winklevoss twins are Bitcoin bulls|
|Bloomberg's lazy Apple bias|
|Signs of new housing bubble in several areas|
|Prison exclusive: Bernie Madoff can't sleep|