Making a partner in a Biglaw firm sounds like being a big name in the legal world. And while the work itself may not be easier, most people would probably think that at least their financial well-being is secured. After all, the widely publicized earnings per partner of top firms are impressive. But a new report suggests it’s not that simple.
American Lawyer reports that between 10% and 30% of partners take compensation haircuts from year to year.
Consultant Blaine Prescott said it’s “not at all unusual” for 20 to 30 percent of a firm’s partners to see their income decline from year to year. He also said compensation was “slowing down rapidly” and that this would “definitely help” provide more compensation to the best-performing partners.
That doesn’t mean your partner should take the hint to leave the company. But, as Prescott continued, “We want to make sure their compensation is aligned with performance.”
While this certainly sounds like a harsh reality (other consultants put the range of partners who receive a share at the lower end of the range of 10% to 30%), it is a reality that did not occur before the 2008 financial crisis. said Christine Stark, a consultant at Fairfax Associates. I said that makes some sense. Companies’ financial performance is improving, which may be a boon for those who don’t contribute to attracting business.
Stark said that even the lower-performing firms in partnership today have benefited greatly from the rise in law firm financial performance over the past three to four years. The recent significant economic gains across the industry are more like a rising tide that lifts all (or many) ships.
“As law firm performance has increased in recent years, so-called peanut butter-like reductions in compensation have occurred,” Stark said. “This means that many people who are not performing significantly better are benefiting from the company’s overall improved profitability levels.”
“If we don’t reduce their points, the payout for those points won’t be commensurate with the revenue they’re bringing in,” said Matthew Bersani, founding partner at Cliff Group. New partner compensation strategies are becoming increasingly popular in the industry.
“In the White Shoes era, it was unheard of to put someone down in points or shares,” Bersani said. “Demotion was the same as telling someone to leave the company.” Nowadays, it is common for a partner’s share or points to decline, but it does not necessarily mean that the partner should leave. No, he added.
Well, it’s a good thing that not all vestiges of collegialism have been removed from the profession.
Kathryn Rubino is a senior editor at Above the Law, host of The Jabot podcast, and co-host of Thinking Like A Lawyer. AtL’s tipster is the best, so be sure to connect with her. Feel free to email her with any tips, questions, or comments. Also, follow her on Twitter @Kathryn1 or Mastodon @.(email protected).
