Law Firms
In ‘pervasive’ trend, some law firms reward partners by creating new tiers or more shares
Some law firms are adding more certainty and equity for top rainmakers by creating new tiers or more shares to boost their base compensation, according to a report by Law.com.
The changes to compensation structure are “one of the most pervasive trends” right now, says law firm pay consultant Blane Prescott, who spoke with Law.com earlier this year.
One firm making a change is Paul, Weiss, Rifkind, Wharton & Garrison, the article says. Under its prior system, top performers received 500 shares in the firm and were eligible for a bonus in addition to their share compensation. Last year, the firm changed the system to award more than 500 shares to top partners while reducing eligible bonus amounts. That tied higher compensation to equity and made it more predictable.
Another example is Latham & Watkins, which uses a points-based compensation system. Previously partners were assigned 300 to 900 points. The law firm created two new tiers of points so that top performers get 1,300 or 1,700 points, leading to an increase in base pay, according to a prior Law.com report on the change.
Increasing base compensation for top performers can leave more money in the bonus pool for other partners, said law firm consultant Lisa Smith in an interview with Law.com. She warned of a downside, however.
As partners scramble to be placed in higher equity tiers, firms could fall victim to a kind of grade inflation, she said. Firms will need to be very clear about what kind of performance is needed to attain the top levels.
“Managing those kinds of expectations becomes important,” Smith told Law.com.
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