Will BakerHostetler eliminate nonequity partners? Change could boost Am Law stats, memo notes
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A confidential law firm memo obtained by Above the Law shows that BakerHostetler is considering a one-tier, equity-partner-only partnership structure.
The July 1 memo says partners will be asked to decide on the proposed change in September.
Since 1992, the firm has had a two-tier partnership structure, writes law firm and policy committee chairman R. Steven Kestner. During that time, the attorney roster has nearly doubled, from 480 lawyers, in eight offices, to 930 lawyers, in 14 offices.
“Simply put, the policy committee voted to recommend this new partnership structure because it will make the firm stronger and more competitive in the long run,” Kestner wrote.
He cited greater partner investment in the success of BakerHostetler and “a more nuanced approach” to partner compensation that will “align performance with ownership.” However, the new structure would not involve raising any additional capital for the firm, Kestner said.
The change would “impact how our results are reflected in The American Lawyer’s annual survey of law firm performance,” Kestner noted.
“The methodology for determining popularly published profits per equity partner (PPEP) generally does not include as equity partners those with less than 50 percent of their compensation in the form of a profits interest,” he explained. “This new structure is not being recommended in order to change how the firm reports its financial results; however, it may result in the firm posting higher PPEP performance.”
In a written statement emailed to the ABA Journal, BakerHostetler said the time is not yet ripe for comment on the possible change in partnership structure.
“The memo cited in Above the Law was an internal communication on a governance matter under consideration by the firm’s partners,” the firm wrote. “It is still under discussion and has not yet been put to a partnership vote, which is still some weeks away. It’s therefore premature to have further discussion about the issue at the present time.”
The Wall Street Journal Law Blog (sub. req.) also has a story.
See also:
ABA Journal: “Have we reached the end of the partnership model?”
