Baker & McKenzie - Company Profile, Information, Business Description, History, Background Information on Baker & McKenzie

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History of Baker & McKenzie

Baker & McKenzie is the world's largest law firm, with 49 offices in 31 countries. The firm has long held the lead in number of lawyers, employing nearly 1,700, including over 500 partners; but in 1992, it became the largest in terms of revenue as well, passing the New York-based Skadden, Arps, Slate, Meagher & Flom for the first time. Baker & McKenzie's practice covers every major field of law, both domestically and internationally.

Several characteristics set this company apart from the other so-called 'megafirms.' The firm's philosophy stresses the importance of understanding the culture and customs of the areas in which it operates as well the laws. Thus Baker & McKenzie tends to staff its overseas offices with local lawyers, rather than sending American lawyers abroad. In addition, about 75 percent of the revenue generated by a foreign office remains in that country, a much higher share than most firms allow. Because of these practices, many competitors have criticized Baker & McKenzie as a franchise operation akin to a fast food chain. Its 'McLaw' approach has confounded the critics, however, by producing results unmatched by any of the other megafirms in recent years.

Although Baker & McKenzie was created in 1949, its roots can be traced to founder Russell Baker's initial law practice, established shortly after his 1925 graduation from the University of Chicago Law School. Baker, who had traveled to Chicago from his native New Mexico by hopping freight trains, began his legal career while still in law school. Working for the Chicago Motor Club, Baker was allowed to try minor traffic cases for Club members before a Justice of the Peace. After graduation, Baker set up a practice with Dana Simpson, a friend and University of Chicago classmate. The firm, Simpson & Baker, specialized in providing services for Chicago's growing Mexican-American community.

Baker's early experience working with Mexican lawyers sparked his interest in international law. Recognizing Chicago's important and expanding role in international trade, Baker conceived the idea of establishing a law firm that would be truly international in scope. After handling the worldwide legal matters for Abbott Laboratories in 1934, Baker built a reputation as an expert in international law. By that time, Simpson had left the practice, and Baker was a partner in Hubbard, Baker & Rice. He was engaged by Abbott to handle its worldwide legal matters, including contract negotiations, acquisitions, and patent and trademark litigation. Working for Abbott, Baker had the opportunity to travel throughout Latin America and Europe, and his notion of creating an international law firm became more concrete.

Since his current partners were not as interested in developing an international practice, Baker began to search for a new partnership. In 1949, he teamed up with John McKenzie, a trial lawyer he had met in a taxi a few years earlier, to form Baker & McKenzie. The firm also included Dwight Hightower and Andrew Brainerd. Since McKenzie had already established a reputation as a skilled litigator, Baker was free to travel in search of international contacts while McKenzie handled the firm's domestic matters.

Baker & McKenzie's list of clients grew impressively in the early 1950s. The list included such major companies as Eli Lilly, G. D. Searle, Wrigley, and Honeywell. As the firm's domestic client list grew so did its international list. In 1955, a Venezuelan lawyer contacted Baker to explore the possibility of setting up a joint venture to handle U.S. business interests in Caracas, prompting the establishment of Baker & McKenzie's first foreign office. By the end of the 1950s, the firm had established six other foreign offices, and its staff of lawyers had grown from 4 to 30. In 1957, offices were opened in Washington, Brussels, and Amsterdam. Zurich, New York, and Sao Paolo were added over the next two years. International expansion continued throughout the 1960s.

Throughout this period of incredibly rapid international development, the firm hired lawyers trained locally to man the new offices. Once recruited, a lawyer usually spent time working out of the firm's home base in Chicago, learning the finer points of its operations, before being reassigned to the company office in his or her native country. Lawyers working out of these foreign offices were treated as equal partners in the firm, not as affiliates or minor leaguers. They had as much say in firm decisions as their American counterparts, and as much opportunity to share in the firms profits. Because the lawyers were trained where they worked, the foreign offices were capable of taking on work from local clients as well as from international concerns.

Throughout its history Baker & McKenzie has tried to make timely moves into areas where the flow of new business activity is about to create a greater need for available legal services. Thus much of Baker & McKenzie's expansion during the 1970s focused on the Far East. A Hong Kong office was established in 1974, and among others, offices were opened in Bangkok and Taipei three years later. By 1978 Baker & McKenzie had 26 offices in 20 countries.

In nearly every case, Baker & McKenzie would start up its foreign offices from scratch, sending attorneys abroad to open an outpost, or recruiting local lawyers and bringing them to Chicago for a few years of orientation before returning them home to set up shop. The office opened in 1979 in Bogotá, Colombia, was a rare exception. It was created through a merger with an 11-lawyer Bogotá firm already in existence.

Founder Russell Baker died on the last day of the firm's annual partnership meeting in 1979. Under chairman Wulf Doser, from the company's Frankfurt office, Baker & McKenzie entered a consolidation phase. During this period, in which the Tokyo office was reorganized and the young Minneapolis office was closed, the firm's approach became more businesslike, something of a contrast from Baker's 'lawyer's manage thyselves' philosophy.

Doser was succeeded as chairman in 1981 by Thomas Bridgman, a litigator from the firm's Chicago home base. When Bridgman's three-year term expired in 1983, Robert Cox was elected to a five-year term as chairman, and the role of that position in the firm was expanded. Unlike his immediate predecessors, Cox gave up his regular law practice to concentrate on managing the firm full time. By 1985, Baker & McKenzie's lawyer count was at 752 and growing. The firm was operating 30 offices in 22 countries. Its annual revenue was in excess of $125 million, second highest among law firms to Skadden, Arps.

The second half of the 1980s was an extremely prolific period in Baker & McKenzie's spread across the globe. It opened offices along the U.S.-Mexican border in 1986 to take advantage of the industrial boom taking place there. And Baker & McKenzie was one of the first American law firms to anticipate the opening of Eastern European markets, as offices were opened in Budapest (1987), Moscow (1989), and Berlin (1990). Like many other law firms, Baker & McKenzie also launched a full-scale assault on California during the late 1980s, expecting a huge rush of investment there by companies from Japan and elsewhere in Asia. The firm opened offices in Palo Alto, Los Angeles, and San Diego. This California expansion included the assimilation of MacDonald, Halsted, and Laybourne, a 68-partner firm with offices in Los Angeles and San Diego. Western Europe was not ignored either, and an office was established in Barcelona in 1988. In 1989 Baker & McKenzie attorneys opened associated offices in Seoul, Korea and Jakarta, Indonesia.

The firm's revenue and lawyer rolls were growing as quickly as its geographical range. Between 1987 and 1990, annual revenue doubled, from $196 million to $404 million. Baker & McKenzie cracked the 1,000-lawyer mark in 1988 (1,179), and it took only two more years to pass 1,500. By 1990, the company was operating a total of 49 offices on 6 continents. In addition to the company growth, prestige came to the offices as well, when David Ruder, the recently retired chairman of the Securities and Exchange Commission, joined the firm's domestic corporate and securities practice.

Baker & McKenzie has not escaped controversy. Three controversies brought unwanted publicity to Baker & McKenzie. In 1991, Ingrid Beall, who had become the firm's first woman partner in 1961, filed a discrimination suit against the firm. The suit revolved around Ms. Beall's claim that she was systematically deprived of the opportunity to advance within the firm on the basis of her age and gender. In a second well-publicized episode, the firm dropped the Church of Scientology as a client, turning its back on $2 million of revenue in the process. Some observers hinted that the move may have resulted from pressure applied to the firm by Eli Lilly, one of its oldest and best customers. The Church of Scientology has been a vocal critic of the antidepressant drug Prozac, which is manufactured by Lilly. And at the end of 1993, Baker & McKenzie was ordered by the New York State Division of Human Rights to pay $500,000 in compensatory damages and back pay to the estate of Geoffrey Bowers. In one of the earliest AIDS discrimination cases in the United States, Bowers had argued that his firing by the company in 1986 was due to his illness rather than his performance, as was claimed by the firm. The decision was contested by Baker & McKenzie.

Many of the firm's foreign offices were generating a substantial share of their own business by 1992. At the company's Latin American outposts, as much as 35 percent of the client base was not U.S.-based. The Paris office's clientele was 40 percent French, and a significant portion of the remainder was Japanese or German, as well as American. For 1992, Baker & McKenzie reported revenue of $503.5 million, moving the firm past Skadden, Arps into first place among law firms. The company's foreign offices accounted for 60 percent of that revenue, a figure far higher than that of most other top international firms.

As the 1990s continue, the competition among international law firms appears to be intensifying. Additional competition is expected to come from large accounting firms, such as Arthur Andersen, which are interested in diversifying into legal services by forging alliances with established law firms in foreign countries. Baker & McKenzie is preparing itself for the increased competition under the guidance of the chairman of the executive committee John McGuigan, an Australian, who joined Baker & McKenzie in 1973 and had served most recently as managing partner at the firm's Hong Kong office. In 1993, new offices were established in Prague and Beijing, reflecting the firm's ongoing emphasis on Asia and Eastern Europe.

For much of its history, Baker & McKenzie has been derided by its competitors for its approach to global expansion. Critics have been quick to argue that it is a loose alliance of local law firms rather than a unified international entity. By employing lawyers in their native regions, however, Baker & McKenzie has succeeded in developing relationships with major companies in those areas more quickly than might otherwise be possible. Throughout the growing markets of Asia and Eastern Europe, many of these critics are reluctantly admitting that the firm they have called 'McLaw' has positioned itself remarkably well.

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Further Reference

Abramowitz, Michael, 'One Woman v. Her Law Firm,' Washington Post, October 14, 1991, p. D1.Baker & McKenzie, Chicago: Baker & McKenzie, 1988.Baker, Russell, History of Baker & McKenzie, Chicago: Baker & McKenzie, 1978.Baker, Wallace R., What Is Baker & McKenzie? Chicago: Baker & McKenzie, 1991.'Cover Profile: Baker & McKenzie's John McGuigan,' Asia Today, February 1994, pp. 5-6.Elstrom, Peter J. W., 'Law Firm Gets a Plum as Ruder Joins Practice,' Crain's Chicago Business, February 26, 1990, p. 47.Feder, Barnaby J., 'The Unorthodox Behemoth of Law Firms,' New York Times, March 14, 1993, sec. 3, p. 1.'Firm Drops L.A. Office,' Wall Street Journal, October 18, 1993, p. B8.Gill, Donna, 'Baker's Unique Niche,' Chicago Lawyer, January 1992, p. 1.Goldberg, Stephanie, 'Law Firm Blankets Globe,' Crain's Chicago Business, October 26, 1992, p. 17.Lyons, James, 'Baker & McKenzie: The Belittled Giant,' American Lawyer, October 1985, pp. 115-22.'McLaw Acquitted,' Economist, July 3, 1993, pp. 61-2.Navarro, Mireya, 'Vindicating a Lawyer with AIDS, Years too Late,' New York Times, January 21, 1994, p. B18.'On the Way to Becoming the Dominant Provider of Legal Services,' Frankfurter Allgemeine Zeitung, October 15, 1993.Rice, Robert, 'Going Global,' Financial Times, May 18, 1993.Stevens, Mark, Power of Attorney: The Rise of the Giant Law Firms, New York: McGraw-Hill, 1986.

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