Business of Law

Partner profits rise as law firms cut equity partners, statistics confirm

A decade of statistics confirm that America’s top law firms are shrinking their proportion of equity partners relative to overall lawyers, and the cuts are often improving profits per partner.

The American Lawyer analyzed the numbers for 97 law firms in the top 100 for 2012 that were also among the top 200 firms in fiscal 2002. The results: The average proportion of equity partners at the top firms declined from 27.8 percent to 23.7 percent in the decade. The 43 firms that cut their partner classes the most had an average increase in profits per partner of 100.7 percent, compared to an average of 74.5 percent for the others.

One example is Jenner & Block. Its percentage of equity partners was 40.9 percent in 2002 and 25.5 percent in 2012. During that period, its profits per partners increased almost 155 percent, the third highest among the top 100 firms. “Since the average equity proportion of firms with PPP of more than $2 million, like Jenner, is just 21 percent, it seems likely that Jenner’s changes to its equity proportion were the intentional result of disciplined management,” the story says.

But the firm is downplaying the significance of cuts, the story says. Jenner’s managing partner, Susan Levy, noted the firm moved to a two-tier partnership 10 years ago, in a statement provided to the American Lawyer. She also said the firm has a “long and venerable history” of partners leaving for public service or in-house positions.

The American Lawyer doesn’t expect a reversal of the trend. Its December Law Firm Leaders survey found that 46 percent of respondents planned to de-equitize partners in 2013, an 8 percent increase from the year before.

The article quotes one law firm partner about the likelihood of continued partner cuts. “It seems pretty inexorable,” the unnamed partner said. “We’ve joked that pretty soon we’ll end up with just two equity partners fighting it out in a steel cage.”

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