a new model for lobbying
In 1962, James Patton Jr., who is now retired, co-founded Barco, Cook and Patton, the precursor to Patton Boggs. He and Boggs, who joined four years later, spotted an opportunity to set their firm apart from others and began building what was then a a nascent model for the influence industry.
At the time, small boutique lobbying firms were the industry standard, and they were mostly led by former heads of federal agencies who became lobbyists after leaving the government. Boggs and Patton envisioned a different kind of lobbying operation — one that was integrated into a major law firm, staffed with attorneys well-versed in the areas of law that lobbyists were looking to change.
“Tom saw the niche no one else saw — of substantive law combined with lobbying,” said the firm’s managing partner Ed Newberry. “So when a Patton Boggs lawyer went to the Hill to talk to the staff director, who was a well-trained lawyer, they were talking to them as a well-trained lawyer, not as a lobbyist who said, ‘Come on, do me a favor.’ ”
The formula served them well. One of the firm’s early successes, the victory that established Patton Boggs as one of the most influential lobby shops in Washington, was when they helped orchestrate the first Chrysler bailout in 1979.
“It was unheard of for the federal government to provide a loan guarantee to a private company,” Boggs said. “It was a very significant win for us.”
Patton Boggs enjoyed unprecedented success during the ’70s, ’80s and ’90s when Washington’s lobbying industry was led by a cult of well-known personalities. Boggs — along with Gerald Cassidy of Cassidy & Associates, Stu Van Scoyoc of Van Scoyoc Associates, Bob Strauss of Akin Gump and J.D. Williams of Williams & Jensen, Mike House of Hogan Lovells — put K Street on the map as the nation’s epicenter of advocacy.
“When I started this gig, there were about 15 people who ran the government,” Boggs said. “You didn’t need a lot of lobbyists, you only had to influence about 15 people.”
That is no longer the case.
“Now you’ve got at least 5,000 people who make government decisions that affect lots and lots of folks,” Boggs said. “As government has gotten more dispersed, you need more people to communicate with the people who now have policymaking power, that’s why the profession has grown so fast.”
A changing industry
Today, there are about 11,700 federally registered lobbyists, according to the Center for Responsive Politics. And that figure doesn’t include the thousands of people in public affairs firms, advertising agencies, grass-roots and Internet campaigns that contribute to the influence machine.
As lobbying became more institutionalized as a mechanism of achieving change in the government, the firm added more manpower and structure. In the mid-1990s, Patton Boggs made a concerted effort to diversify its practices, bulk up on staff and add new layers of management, going from a 150-lawyer firm to the 550-lawyer, 1,100-employee firm it is today.
Still, the Patton Boggs brand is inextricably linked to Boggs himself, and that brings real challenges if and when Boggs, 72, decides to step aside. (He says he is not going anywhere right now.)
“There is no replacement for Boggs,” said Mark Cowan, who managed business development at Patton Boggs until he left for Cassidy & Associates in June. “That doesn’t mean the firm won’t do well after he retires, but his name is on the door. People know it as his firm.”
Indeed, Boggs is regarded as a master strategist in the nation’s capital.
“It is very difficult to maintain the same market position after you lose what really has become a deity in the government relations space,” said Ivan Adler, a recruiter for lawyers and lobbyists at the McCormick Group.
By many measures, Patton Boggs is still dominant. Since 2003, the firm has topped the list of Washington’s most profitable lobby shops. Its market share grew even bigger in 2010, when it acquired Breaux Lott Leadership Group, the lobby firm created in 2008 by ex-senators John Breaux and Trent Lott. In 2011, Patton Boggs reported $47.7 million in lobbying revenue. But without the $12 million annual boost from Breaux Lott, Patton Boggs’s lobbying revenue dropped about 9 percent between 2010 and 2011, according to Senate filings.
Firm leaders pride themselves on being the best at “anything where the government is involved” — be it litigation, a corporate merger or transaction, or an environmental regulatory issue.
“We’re a large law firm that specializes in solving problems, often where the government is involved, and we look at those problems differently than almost any other law firm,” Newberry said. “We might try to change the law, we might sue, we might try to change the regulation, we might lobby the executive branch, we might lobby Congress. . . . We try to look at every different avenue. It’s what differentiates us from everyone else.”
Boggs equals lobbying
Although Patton Boggs’s reputation may be cemented in the minds of corporate counsel as a go-to lobbying firm, its strength is also at times a weakness. It is not a firm that comes to mind for handling major mergers and transactions, business litigation or other markers of a truly full-service law firm. Few law firms rely as heavily on lobbying as Patton Boggs does. Between 20 and 23 percent of the firm’s revenue comes from lobbying — an unusually large slice of the pie. At most large law firms that have lobbying practices, lobbying makes up 10 percent or less of the firm’s overall earnings.
Newberry said the high percentage is because Patton Boggs dominates the lobbying space, and that government relations is the practice that sets the firm apart from others — but not everyone agrees.
“At a law firm, when you’re overly reliant on a single practice group, or overly reliant on a particular individual like your founder, it’s a huge hole to fill,” said Rich Gold, who chairs the lobbying group at Holland & Knight. “The scope and breadth of Tommy’s skills and what he’s brought to the table is not something that anyone is going to replace at the end of the day.”
Patton Boggs has lost a number of high-ranking partners to other firms in recent years. In 2009, John Martin, who co-chaired the firm’s environmental group, left for Crowell & Moring and took four other partners with him. In December, three mortgage banking partners and one associate left for Ballard Spahr. Last month, Paul Rubin, former co-chair of the firm’s Food and Drug Administration group jumped to Ropes & Gray.
The departures in and of themselves are not that unusual — lawyers jump from firm to firm all the time. But there is some internal uncertainty over how the business will be structured going forward. Part of the deliberation is over the way Patton Boggs charges clients and pays its own lawyers.
The firm’s compensation system for partners — in other words, how profits are distributed among top-level lawyers and lobbyists — places a strong emphasis on business generation. Pay is based on three factors: 42 percent on how many hours they bill, 29 percent on origination (signing new clients) and 29 percent on their supervision of other partners and associates on client matters.
Patton Boggs relied entirely on this formula until 2009, when managers created a compensation committee to “bring the system into the mainstream,” Newberry said. The nine-member committee allocates 15 percent of the firm’s profits among partners. Still, 85 percent of profits are allocated according to the aforementioned formula.
It is an unusually rigid way to calculate pay, especially compared to many other law firms that use a more subjective process that weighs factors such as leadership and collaboration more heavily.
Critics of the origination pay scheme, often called “eat what you kill,” say it discourages people from sharing their clients with colleagues.
“A mechanical scheme where you can get paid based on an exact percentage of how much business you bring in is anathema to building a firm,” Gold said. “It incentivizes you to care only about bringing in and working on business that’s yours. It disincentivizes teamwork.”
Patton Boggs is looking to restructure the pay system, but it’s unclear what changes will be made, Newberry said. Part of the uncertainty is because the firm is also experimenting with what’s known in the legal industry as “alternative fees” — ways to charge clients other than by the hour, which is how law firms have historically billed for legal services. About 35 percent of the firm’s fees comes from such arrangements, including flat fees and fees based on the success of an engagement. Because it’s not yet clear which kinds of alternative fees will work best for the firm, the ultimate shape of the compensation system remains to be seen.
“I don’t know the answer yet because I don’t know the answer to first part — which alternative fee structures work the best?” Newberry said. “There are a lot of different models out here, we’re taking a hard look at all of them.”
He acknowledged that Patton Boggs may not be the best fit for everyone.
“If you’re not an entrepreneurial person, this is not the best law firm to work for,” he said. “You probably don’t love it. You probably feel it’s not the right fit. But if you are an entrepreneurial person, this is probably the best firm in the country to work for.”
When asked about his future with the firm, Boggs avoids the word “retirement.”
“I’ll keep doing it as long as it’s fun,” he said. “When we started, we were lucky to get the 50th kid in the law school class. Now we have people knocking at our door to work for us, and they’re very bright people. That’s fun. As long as I enjoy it and have fun with it, I’m going to do it for a good while.”
Boggs said he hasn’t thought about who will replace him as chairman, saying only that the firm has “plenty of good people.” He acknowledged an age gap in talent at the firm: because they could recruit higher-caliber people in the ’90s than in the ’70s and ’80s, “our talent is not as good with the 50- to 60-year-olds as it is with the 40- to 50-year-olds,” he said.
The firm does not lack a roster of big names beyond Boggs. The Breaux Lott acquisition brought in the two former senators. Ben Ginsberg, a senior partner, is the lead campaign lawyer for Republican presidential candidate Mitt Romney. Former FCC chairman Kevin Martin leads the firm’s technology and communications practice.
“We’ve got a whole range of people who are every bit as prominent as Tom Boggs,” Newberry said. “That diversity of people . . . it makes me confident our brand is deeper and broader than Tom Boggs, who is an incredibly important part of the firm, but there are a lot of other people who are as well.”
Mike House, a veteran lobbyist and sometime-adversary of Boggs, said he sees a solid future for Patton Boggs after Boggs but, like every other firm, they will have to find a way to stay relevant.
“They have a brand, it has become an institutional brand as Tommy has slowed down,” House said. “I think they’ll be like everyone else — trying to figure out how to enhance the brand and keep the brand relevant.”