Law firms cut compensation for some partners, freeing up cash for high performers
Law firms are cutting compensation for some partners because of reduced productivity or impending retirements, a contrast from more collegial days. (Image from Shutterstock)
Law firms are cutting compensation for some partners because of reduced productivity or impending retirements, a contrast from more collegial days, according to consultants who spoke with Law.com.
“In the white-shoe days, it was unheard of to move somebody down” the compensation ladder, said Matthew Bersani, a founding partner of the Cliff Group, a legal consulting company, in an interview with Law.com.
Now, he estimates, about 10% to 20% of partners in a firm in any given year are seeing a reduction in shares or “points” reflecting ownership amounts.
Other consultants differed on the percentage of partners at firms seeing less compensation. Consultant Blane Prescott told Law.com that it is not unusual for 20% to 30% of partners to see compensation cuts.
But partners making less money are sometimes transitioning out of law practice because of retirements, said Kristin Stark, a Fairfax Associates consultant.
“Are firms still making difficult performance management decisions? Yes, they are. In some firms, you’ll still see 20% or so go down. But some of that will be driven by retirements,” she told Law.com.
Stark said downgrading partner compensation was more common during the financial crisis in the late 2000s and at the outset of the COVID-19 pandemic. Now, good economic times are helping lower performing partners.
“With the uptick of law firm performance in recent years, there’s been some of what we’d call a peanut buttering of compensation,” involving spreading the money, Stark told Law.com.
