- Big Law associates and rainmakers are getting record pay as firms vie for talent.
- But some junior and “service” partners are feeling short-changed.
- The widening disparity in pay is wearing on law firms’ culture and competitiveness.
As major law firms have distributed profits to partners after a busy 2021, they’re under increasing pressure to pay their rainmakers a bigger slice. That means less is left over for partners lower in the ranks.
A senior partner at a large law firm said firms with bonus pools for top partners were seeing some of the most significant internal debate, in part because it’s a “zero sum game” and there would be only a single payout on last year’s extraordinary revenue.
“If you’re paying out the profits based on the past 10 months, it doesn’t reward productive and collaborative behavior for the past 10 years,” said another partner at a top law firm.
At Dechert, for instance, tensions have surfaced about the pay package of one of its senior corporate partners, Mark Thierfelder, who advised on one of the largest private-equity deals last year, according to a person familiar with the matter.
Thierfelder earned roughly $12 million, his bonus constituting about $2 million of the compensation, according to this person. Thierfelder is the head of the firm’s private-equity department and advises the sovereign wealth fund GIC as a client, including on its buyout of Medline last year.
Some of the more junior partners in the Dechert corporate department haven’t been pleased to learn about Thierfelder’s outsize compensation package, this person said. By comparison, they’ve seen incremental increases in their own pay, the person added.
A former Dechert lawyer said there was a “massive” gap between the lowest-paid partners and the “superclass” of partners, which includes firm leadership.
Thierfelder declined to comment through a firm spokesperson.
The Big Law talent war has been red hot in recent years, with firms raising pay for junior lawyers and opening their pocketbooks to woo rainmakers.
Meanwhile, certain tranches of lawyers feel like they’re being left in the dust. These include so-called service partners and senior associates who do the grunt work and whose billable hours rake in substantial revenue for a firm.
One partner called this group “the invisible middle.”
“You’ve got partners who bring in the work and deserve to be compensated for it, and partners who do the work and deserve to be compensated for it as well,” the partner said. “It’s not unlike a professional sports team without the O line: A quarterback can be great, but they’re not much without a strong O line.”
Insider spoke with 23 current and former law-firm partners, associates, and recruiters about how the widening gap in compensation had changed the legal profession. Some said it created rifts in firm culture and stymied the growth of junior lawyers, while others said it’s necessary to give higher pay to the lawyers who brought in clients. Many lawyers who spoke with Insider were granted anonymity because they did not have permission from their firms to speak with the press. Their identities are known to Insider.
Pay gaps have risen with the demise of lockstep
Gaps between the lowest- and highest-paid partners have grown as traditional firms like Cravath, Swaine & Moore have modified their pay scales to better compensate junior lawyers. Firms have done so in part to keep lawyers from being poached by firms like Kirkland & Ellis, which say they pay based on merit more than years of experience.
Some firms have also sought new ways to boost the compensation of top partners. Incoming equity partners, for instance, can often negotiate guarantees that they’ll maintain their number of shares for a period of time regardless of performance, two people told Insider.
This year, in particular, partners have had more leverage than usual to demand higher salaries, people said. Some of the biggest pay packages have been offered to lawyers who work with private-equity and corporate clients.
Meanwhile, firms looking to beef up their corporate practices are said to be offering significant pay bumps to lure new hires — both for rainmakers and for lower-ranking partners whose books of business they could take or leave.
Sometimes, the firms just need additional lawyers to service a big client, one person said.
One law firm seeking to expand its corporate practice is Gibson Dunn. The firm hired Douglas Horowitz, a capital-markets partner who joined from Cahill Gordon in early April. His pay at Gibson Dunn is said to be $9 million, according to a person familiar with the matter.
Horowitz did not respond to a request for comment.
One Gibson Dunn partner viewed such pay packages as necessary to lure talent away from competitors. Rainmakers are often unpersuaded to leave their firms, especially if it’s where they’ve spent years building relationships, this person said.
“In some sense, it’s a hit or miss strategy, almost like the draft in sports,” the lawyer said. “If you hire enough laterals, and one works out really well, it’ll make up for the five people not working out.”
Large gaps in pay can cause law firms to take a ‘culture hit’
There are risks associated with rewarding lawyers based on individual performance rather than seniority, however. The rejiggering has caused disloyalty and prompted lawyers to look out for themselves, according to sources.
Incentivizing lawyers to bring in clients, for instance, can create a “grabby sales atmosphere” where partners think they “own” clients and receive credit for the business they generate, Avery Ellis, a recruiter at Mestel & Co., said.
Poaching partners from competitors can cause a “culture hit,” according to Big Law attorneys. Especially when partners are paid in the high seven figures, the additions come at the expense of homegrown senior associates and junior partners, who can see fewer opportunities to grow their own practices.
“You can’t keep your culture when somebody is making eight times as much as someone else,” a Gibson Dunn partner said. “In what sense are those people partners? They’re not.”
Some firms have resisted changing their pay system to protect their culture. The incoming chair of Debevoise & Plimpton recently told Bloomberg Law that he had no plans to abandon their so-called lockstep pay model, a system that compensates lawyers based on years of experience rather than business generation.
Debevoise, which is said by people with knowledge of its system to pay its most senior partners about three times as much as its junior partners, is one of only two Big Law firms left to use such a “pure” lockstep system. The other is Wachtell, Lipton, Rosen & Katz.
Growing gaps in partner pay may just be the cost of doing business
Plenty of lawyers are on board with the trade-offs of working at a firm where lawyers sink or swim based on the success of their own practice. And some believe lawyers at the top end of the pay scale deserve the extra money.
“They’re fighting like hell to build relationships,” said one junior corporate partner on the West Coast who was at peace with the pay disparity between himself and top partners.
But in other instances, lawyers found the class divide extreme.
A lawyer at one large law firm said some senior associates at her firm took home more than nonequity partners in recent years. The lawyer said she didn’t begrudge senior partners at her firm for earning more than her but that subsidizing associate salaries by underpaying nonequity partners was a step too far.
That move came as law firms across the industry offered large salaries to associates in an effort to staff a rising tide of deals and litigations. Many firms paid out large bonuses in 2021, helping the most senior associates make over $550,000 last year — and perhaps even more if they moved firms and landed a signing bonus.
While the money’s been great, the focus on pay has also meant some lawyers don’t even care which firm they’re at, as long as they’re getting paid well for their 2,500-hour work year. One lawyer said that he followed whoever the rainmaker was to whatever firm they went to, since that’s where the business and opportunities would be.
On the other hand, high pay — even at the expense of firm culture — may be necessary for firms to survive, Jeffrey Lowe, a recruiter at Major, Lindsey & Africa, said.
Refusing to change compensation models in order to preserve firm culture could have its own cost, according to Lowe.
“Our highest-performing partners are now walking out the door because they’re able to double or triple their compensation,” Lowe said. “What is it that we’re preserving if we can’t remain competitive in the marketplace?”