More and More Law Firms Are Paying Top Partners $10 Million a Year

Fatima Fokina
  • Gibson Dunn is the latest firm to change its pay model, offering bigger salaries to top partners.
  • The group of Big Law partners making “ballplayer money” is growing, recruiters told Insider.
  • Kirkland & Ellis, which pays top earners more than $20 million, has led the change.

In some upper-echelon circles of the legal industry, lawyers have long thought of themselves as service providers to clients, with the amount of money they are paid treated as almost an afterthought.

The work comes first, and the money follows, or so it’s been preached at firms like Wachtell, Cravath, and white-shoe establishments that favor the institution over individuality.

But now, more and more law firms are willing to shell out eight figures to their biggest rainmakers. And those pay packages are luring away younger stars from traditional firms.

The leader of the pack, Kirkland & Ellis, pays top earners more than $20 million a year, according to people familiar with the matter. More than any other firm, Kirkland’s willingness to pay increasingly large sums to top partners has driven other firms to do the same, law-firm partners, recruiters, and consultants told Insider.

The latest law firm to feel the squeeze is Gibson, Dunn & Crutcher. The Los Angeles litigation firm recently tweaked its pay model to pay top partners up to $12 or $13 million, according to two partners with direct knowledge of the matter and one former firm partner.       

“We were paying top rainmakers well below market,” said one firm partner, who added that the country’s top 20 law firms are all competing for the same client work and talent. “If you are trying to attract top talent, you have to bust open your compensation structure.”

A second Gibson Dunn partner referred to the new policy as “more of a Kirkland model.”

A third lawyer who is a former firm partner said the change in compensation was a significant shift for the firm and that he was unaware of any time in recent memory when the firm went through such a restructuring of partner pay. Historically, the firm paid its top partners four times as much as its most junior partners, this person said. Now, top partners will make at least five times as much.

A spokesperson for Gibson Dunn declined to comment.

Lawyers are making ‘ballplayer money’

Decades ago, many elite law firms paid their partners using a so-called lockstep model, where pay increased with seniority. Now, lawyers act like free agents, and the clients they bring in determine their value.

Several firms have the ability to pay a handful of partners on par with the fund managers and bankers they turn to for business. 

At Kirkland, Latham & Watkins, and elsewhere, an elite group of rainmakers with books of business worth in the range of $100 million is increasingly commanding eight-figure compensation packages, particularly in corporate, finance, and deals groups, recruiters and law-firm partners told Insider.

Top partners at Paul Weiss, Willkie Farr, Weil Gotshal, and others are also commanding eight-figure pay, recruiters said.

“It’s ballplayer money,” said Sarah Morris, a recruiter at the search firm Macrae.

Matthew Bersani, a legal consultant at Cliff Group who spent decades as a partner at a large law firm, estimated that there were now “30 to 40 firms where there’s a partner making more than $10 million.”

Rising partner pay comes as Big Law firms post record profits

The sky-high pay numbers come at a time when law firms are reporting extraordinary growth. Propelled by transactions work and fast-rising hourly rates, law-firm revenues went up 14% last year, according to a Wells Fargo survey of 130 firms.

As revenue and profits soar at the top firms, partner compensation has “gone through the roof,” Jon Truster, who specializes in partner recruiting at Macrae, said. Equity-partner classes have also gotten smaller, allowing firms to share more profits with top rainmakers, according to Truster.

Another recruiter, Mark Jungers, said firms were attentive to pay for top partners because they were wary of them being poached by Kirkland.

“The Kirkland effect is that there are people out there with businesses that justify basically almost any amount of compensation,” Jungers said. “And so if Kirkland always wants these people, and is willing to pay them, if you want these people, you also have to be willing to join the pay party.”

A representative for Kirkland declined to comment for this story.

Gary Miles, a recruiter, said many firms were evaluating whether to change their compensation systems in light of the new environment in which partners earn more.

The key, he said, is staying competitive “so they don’t lose their partners to the Kirklands of the world.”

It’s unclear how the news of Gibson Dunn’s pay change is being received across the partnership. Its partners usually make the most money toward the end of the year, when client bills come in and their performance is evaluated, according to one of the firm partners. 

This person believes that bigger pay for top-earners will enable the law firm to expand its corporate department in order to compete with firms like Kirkland and Paul Weiss. The changes may also allow partners with big books of business to climb the compensation ladder more quickly, the partner said.

Top lawyer pay is rising as other industries struggle

The Big Law changes come as many businesses have struggled in the wake of the pandemic, particularly in the retail, hospitality, and energy sectors.

Large law firms, by contrast, have seen their profits soar as attorneys have been summoned to advise on the bankruptcies, mergers and acquisitions, and litigations that have marked the tumultuous period.

David Walden, a legal recruiter, said the pay of top rainmakers was already rising before the pandemic but had recently taken off even further. He said he was struck by the fact that some lawyers earned more than many investment bankers.

“Most workers — blue collar or white collar — barely increase their compensation year to year to keep up with inflation,” Walden said. 

“It used to be unheard of to have partners make 8, 10, 15, and some of them $20 million a year,” he said.

Alisa Levin, a legal recruiter who has encouraged lawyers to donate to the UJA-Federation of New York, said she’d noticed a shift at fundraising events.

“The big bucks came from the Wall Street division, and the lawyers were giving nice little gifts, but nothing like it,” Levin said. “I said, ‘This does not reflect reality anymore. Lawyers are really accumulating wealth now.'”

https://www.businessinsider.com/big-law-partner-pay-gibson-dunn-10-million-kirkland-effect-2022-3

Next Post

Attic bedroom ideas: 10 inspiring designs for your loft

Attic bedroom ideas offer the perfect opportunity to expand the available living space in your home. Separate from the rest of the house, your attic can be transformed to cater to whatever you need, from creating a cozy master suite to providing a welcoming space for guests to come and […]