Taxation & Estate Planning

Wal-Mart and Origination Credit

By Joel A. Schoenmeyer

If there's one thing middle-aged law firm partners love, it's wearing Dockers on casual Friday.

If there are two things middle-aged law firm partners love, it's (1) wearing Dockers on casual Friday and (2) getting origination credit for their firm's clients (especially the big ones).

What's origination credit? Basically, it's the credit an attorney gets for bringing in a client. In many (most?) cases, attorney compensation and promotions are based on how much work you bring in. The problem is that some partners are notorious for stabbing other attorneys (usually younger partners, sometimes associates) in the back, and using their status in the firm to take credit where credit definitely isn't due. After all, if the head of your department claims credit for bringing in the ABC Company, are you really going to argue with him about it? Probably not. Instead, you're probably going to keep your mouth shut and work harder (and hope the economy improves such that you can go elsewhere, to a firm that will reward you fairly).

Origination credit is in the news in a major way today, because of Wal-Mart. According to the Wall Street Journal's law blog:

Wal-Mart has issued various requests to firms in recent years that they hire and retain more women and minority lawyers, but the company recently took a more controversial step: insisting that it have a say in deciding which firm lawyers get origination credit for Wal-Mart work.

That's big news. Is it fair? It sort of depends on how origination credit is handled. As I indicated above, having origination credit stolen is an important (but rarely discussed) issue at big law firms. But how will Wal-Mart handle the awarding of origination credit?

The initiative, the Daily Journal reports (link unavailable), is designed to ensure that firms not only retain more minorities but also that they ensure that minorities are designated as key client contacts.

Some firms, the Journal reports, are not pleased that Wal-Mart is meddling in internal decisions about who gets client credit.

There's also a philosophical issue involving who deserves credit for maintaining a client relationship. If Attorney Smith brings in ABC Company (which generates $1 million per year in billings for the firm), but Attorney Jones oversees the work and makes sure ABC Company is happy, who deserves origination credit? A lot of firms would give it 100% to Attorney Smith. I wouldn't -- I'd split it 50-50 among the two of them, or give more and more credit to Attorney Smith as the years go by. I think Wal-Mart agrees with me, but the extent of their agreement (and whether other large companies will follow suit) remains to be seen.

Full post as published by Death and Taxes Blog on March 23, 2011 (boomark / email).