Surf’s up, Biglaw! More big-name firms are now ready to ride the two-tier partnership wave, and other firms may be testing the waters soon.
Cravath was one of the first longtime holdouts to cut bait and create a “salaried partner tier” (i.e., non-equity partners) back in November. Now, Paul Weiss — a firm that’s ranked near the tippy top of the Am Law 100 — is ready to do the same.
According to the American Lawyer, Paul Weiss saw its overall revenue soar to $2 billion in 2023, an all-time record for the firm. Profits per equity partner at Paul Weiss also passed $6.5 million, another first for the firm, with average profits per equity partner up 14.8%. With all of this cash freely flowing, the firm has decided that now is the time to move forward with a two-tier partnership — on top of its now confirmed black box compensation system for partners.
Why is the firm moving in this direction? Paul Weiss chair Brad Karp told Am Law that it was “to address head-on the competitive realities of the current marketplace,” and that he would “put both of those things [black box compensation and the creation of a non-equity tier] in the same category.” Here are some additional details:
While Law.com previously reported that Paul Weiss was considering a move to a two-tier partnership of equity and nonequity partners, Karp on Tuesday confirmed that the firm will implement it, following most of the Am Law 100 with the two-tier structure.
Karp said that, as of Tuesday afternoon, the firm does not have any non-equity partners, but that will change, noting the firm was “just in the process of starting” the two-tier system.
“It is critical for law firms, including Paul Weiss, to address head-on the competitive realities of the current marketplace rather than avoid the hard issues,” Karp said. “We had an all-equity partnership for close to a century, but things have shifted, and we don’t want to put ourselves at a competitive disadvantage.”
Biglaw firms like Cravath and Paul Weiss are making major moves on partnership and compensation in order to recruit and retain rainmakers and to calm dissension within their ranks — and we can expect more firms to follow the leader in the years to come. According to the 2024 Client Advisory from Hildebrandt Consulting and Citi’s Global Wealth at Work Law Firm Group, 83% of Biglaw firms expect to increase the size of their income partner roles in the next two years.
Is your firm planning to move to a black-box compensation system for partners or increase its non-equity partnership ranks? Please please text us (646-820-8477) or email us and let us know. Thanks.
Paul Weiss, Seeing Record Year in Revenue and Profits, Plans Compensation, Partnership Changes [American Lawyer]
Staci Zaretsky is a senior editor at Above the Law, where she’s worked since 2011. She’d love to hear from you, so please feel free to email her with any tips, questions, comments, or critiques. You can follow her on Twitter and Threads or connect with her on LinkedIn.
