Everyone is talking about the recent Partners Compensation Survey conducted jointly by Major, Lindsay and Africa, and Law360. Perhaps rightly so. The data for the Survey came from some 1800 equity and nonequity partners. While it was not specified, my guess is that those surveyed primarily came from larger firms.
The big headline from the Survey is that 2021 was a great year to be a partner in big law, at least financially. It was a record year across the board. So much for the notion that you can’t be productive working from home. But there were some other takeaways that are perhaps not so attention-grabbing. I recently talked with Craig Savitzky, Senior Data Analyst of Law360, about some of these.
Here is what caught my attention:
Consistent with everyone else, partners (2/3rds of them) want to work remotely. Although, as the recent announcements of Ropes and Gray, and Cravath suggest, they don’t necessarily want to give everyone else the same freedom.
While it was a record year for compensation for partners, the average rate increase in 2021 was 5%. That sounds good, but it probably didn’t keep up with inflation in 2021 and certainly won’t this year. If demand declines (and it seems to be), then law firms and partners might face a squeeze.
Another potentially troubling finding: average originations increased only slightly. This slight increase may be because partners didn’t have time to chase new business like they used to. But if present work declines and rates don’t increase much, partners may regret not being more aggressive about origination. In addition, Savitsky and I both speculated that the compensation increases primarily came from increased revenues. Not decreased costs. So if revenue declines, firms may be forced to cut costs, perhaps even significantly, to keep compensation at the same or close to the same levels.
You have to ask yourself why the gap between women’s and men’s compensation in a profession devoted to the pursuit of justice is greater than that in the general workforce.That’s inexcusable.
Women’s compensation is still a whopping 34% less than men’s. Yes, the gap narrowed in 2021. But before anyone pats themselves on the back, consider the fact that in general, women are paid 34% less than men to do the same job. And what does that mean in real dollars? If a male partner makes, say $500,000, his female partner would make only $330,000 or $170,000 less. Compare that to the general workforce: on average women get paid 79% of what men do. That’s not great but you have to ask yourself why the gap between women’s and men’s compensation in a profession devoted to the pursuit of justice is greater than that in the general workforce. That’s inexcusable. Of course, men’s originations are much higher than those of women. That gap evidences that the good ole boy network still exists. In-house lawyers (primarily male) refer most work to lawyers in well known law firms (also primarily male).
The compensation gap between equity partners and nonequity “partners” (let’s face it, they are generally partners in name only) has grown. Not surprisingly, nonequity partners are less happy with their compensation than equity ones. But equity partners generate, on average, four times more origination than no equity partners. There’s a reason nonequity partners are equity ones. But firms have made lots of nonequity partners in recent years, for the stage may be set for significant dissatisfaction in the ranks.
Those partners doing M & A and corporate work did the best (up a “staggering” 26%. To put that in perspective, if you brought home $1mill the previous year, you would have made 1.26 mill in 2021!).
Litigation partners could be in a sweet spot when there is a downturn in other work
But litigation was second. That’s interesting since 2021 was a transition year for litigation as trials began to resume. Litigation partners could be in a sweet spot when there is a downturn in other work. 2022 may yield lots of increased litigation as courts try to eliminate backloads. Most litigation partners I know are swamped with more trials set they can handle.
Partners in open compensation systems (those where the partners all know what each other makes) made more money than those in closed or partially closed systems. I suspect this is because open systems keep the system more honest. It’s harder to overpay some partners when the discrepancy is displayed for all to see.
Lawyers don’t like change even when they have the choice, I guess.
Despite all the attention on work life balance and well being, 24% said their firms had no new well being programs whatsoever. This despite the stress of the Covid crisis and heavy work demands. And while remote work would allow partners to work from anywhere, only a few choose to move to a better location to do work. Lawyers don’t like change even when they have the choice, I guess.
So while most of the attention is on compensation in general, there are many other interesting findings. These latter findings could point toward significant developments in the future. Developments that could dwarf the impact of the comp increases. Stay tuned.
Major Lindsay and Africa is a legal search firm. Law360 is a LexisNexis company. This is the first year for the joint Survey.