In my book, Take the Bar and Beat Me, I described the process of becoming a lawyer, from law school through the first years of practice in a corporate law firm. That book’s account ended with my transition from corporate law to a firm that specialized in executive compensation. This post elaborates somewhat on the latter experience.
The firm I joined, Bachelder Law Offices, was among the top firms providing legal services to Fortune 500 chief executive officers. The firm’s executive compensation focus meant that it was retained for purposes of enhancing the salary, bonus, stock options, and other compensation elements offered to the CEO client. In other words, we were hired in order to help corporate leaders take as much money as possible from the corporations that were hiring them.
As many have commented, this sort of work could be extremely rapacious and, thus, controversial. We could very well be seeking to help an incompetent CEO rip off the corporation’s stockholders for every penny he could get. Consider this exchange between a New York Times reporter and Joe Bachelder:
Q. If the value of a company’s stock drops, should executives with large contracts give something back?
A. What is compensation? It’s pay for services over the long term and the short term. If I worked for 10 years and the company had 2 bad years, how should we look at it? The C.E.O. was responsible for the enormous wealth and growth of the company as well as the opportunity everyone had to ride with its good fortune. Except for a Michael Jordan, who never had one, C.E.O.’s can have a bad year. They do get fired. Some may ”retire” at a young age, but a significant number are really being fired.
In that exchange, Joe did not exactly answer the question. Rather, he disputed the premise: maybe, he said, the drop was only temporary or illusory. If it was real, he allowed, the CEO might be fired – but he did not proceed to the next point in such a scenario, which would be that his negotiations would typically have provided that incompetent CEO with a golden parachute agreement, costing the hapless corporation additional millions to get rid of that loser.
The controversy in Joe’s work was not limited to the case of the incompetent executive. During this era in American corporate history, CEOs across the board were taking ever-larger amounts, both in absolute terms and in relation to what they were paying their employees. The notorious CEO-to-worker pay gap has ballooned: in 2013, American CEOs were making about 350 times as much as their average employee. (In the case of Walmart, the ratio was more than 1,000 to one; a Huffington Post piece reports that it takes an average McDonald’s employee four months to earn what the McDonald’s CEO receives in an hour.) American CEOs were also making far more than CEOs in other advanced countries. During this time period, those leading American corporations were also transferring jobs and investments en masse to China and other countries.
It took a certain type of person to engage in such behaviors. Basically, these are sick people. For one thing, as summarized by The New York Times, researchers in one recent study found that people have a tendency to engage in “mindless accumulation” of more wealth than they can possibly use. Wall Street had already acquainted me with a type of person for whom there is simply never enough – with, you might say, a sort of white-line fever that loses contact with the realities of life for employers, employees, consumers, and the public.
I came to Joe’s firm somewhat unexpectedly. For reasons outlined in Take the Bar, I had already grown disgusted with law firms. I decided to start my career over again as a computer person. I had taken a programming course in 1979, had had some exposure to various kinds of technical work in business school in the early 1980s, and bought my own IBM PC from Macy’s in 1983. I quickly acquired and mastered the Lotus 1-2-3 spreadsheet program and marketed myself as the somewhat rare individual who could do spreadsheeting on a relatively advanced level. I answered an ad in the newspaper and, what do you know, there I was, back in a law firm again.
The money was good. When interviewing with the guy I was going to be replacing at Bachelder’s, based on my estimate of what spreadsheet people were making, I asked for $35,000. (This was a decent salary in 1987.) On my next visit, I met with Joe for the first time. He offered me the job and a salary of $55,000. I don’t know if the guy I spoke with told Joe of my request, or just decided that I needed to be paid more than the secretaries who, I discovered, were quite nicely compensated as well. My salary and bonus went up later.
Joe, himself, took pains to charge just slightly below what the most expensive lawyers in New York City were charging – the leading criminal defense attorneys, as it turned out. Early on, that meant a billing rate, for him, of just under $500 per hour. In later years, it meant a rate of just under $1,000 per hour. The billing rates of every other professional in the firm were adjusted accordingly; as a computer person, I was billing at $175 per hour.
In my two years there, I never once had to buy my own lunch; it was always on the client. Lunchtime, with a half-dozen of us sitting around and discussing the situation for a certain client, could cost that client $1,500. Or, more precisely, it would cost the corporation that much. The typical arrangement was that Joe would get the corporation to agree to pay his fees, on behalf of the new CEO that the corporation was trying to hire. In other words, the company was paying for us to represent the new guy’s interests against the company itself. This sort of thing was possible because the new CEO was buddies with the corporation’s directors, and might well be on the board at companies where they were hoping to become CEOs. There was a lot of mutual back-scratching.
My work at Joe’s involved translation of tax and math principles into spreadsheets that clients could understand. I would sit there with Margaret, the tax attorney, or Roz, the math PhD. They would explain to me the concept behind some provision of tax law, or some mathematical estimation technique (e.g., Black-Scholes). Once I got the idea, I sent them away; I had learned that they would just slow me down, as I converted their concepts into a working, adjustable spreadsheet model of the client’s situation. As Roz later noted, I was pretty good at this.
Joe’s practice was growing. He hired a second MBA to share the load with me. From my perspective, that was great, because my divorce was heating up and, anyway, I wanted to become more active in firm management (especially computer system management) issues. The spreadsheet work had been interesting, but I guess it probably showed that I was not especially excited about making these fat cats richer. So I turned to these other pursuits, to some degree. The new guy, Jim Reda, did well. Some years later, he went on to found his own executive compensation firm, apparently rivaling Joe’s in some cases.
There did seem to be a need for some attention to firm management. Joe was a smart guy, but he could do really stupid things. That’s how it seems with lawyers, sometimes: the very qualities of intensity and nervous energy that keep them on the ball for their clients can seemingly impair the ability to just chill out and think. So, for instance, Joe spent a quarter of a million dollars on a Wang computer system for eight users. There are at least three imponderables in that sentence, and perhaps I need not belabor any of them. Another time, he got the idea that he should have a curving mahogany staircase, to create the ambiance of a big firm. So he took out a lease on an adjacent floor, there in his Park Avenue offices, and had the construction guys drill a hole and install the staircase. Only problem was, the staircase went down. That’s right: you’d walk into his lobby, and if you didn’t watch where you were going, you might just take a tumble. The good news is, at the bottom it would empty out into a wall, so your fall would be arrested at that point. Another quarter-million but, hey, who’s counting?
As we approached the two-year mark, Joe asked me to justify my position. I guess I could see the logic of that: nobody likes a smartass. I could have probably made a sale, or at least I could have been smart enough to apply my own experience and negotiate a severance package. But I had caught up on many of my bills, my condo had sold, and I was ready to light out for the territories. And so, after twelve years in New York, on May 26, 1989, I left for a new life in Colorado.