Law Practice Management
Eversheds Eliminates Planned Partner Profit Payouts
Posted Oct 30, 2008, 10:36 am CST
By Martha Neil
In the latest example of law firms battening their hatches to cope with a stormy economy, a major United Kingdom firm is eliminating quarterly profit distributions to equity partners scheduled for November and February.
"Eversheds said the unusual move was aimed at encouraging partners to improve lock-up—work in progress and the length of time taken for clients to settle bills—after a number of cash management targets had been missed," reports Legal Week.
The law firm pays a small amount of its profits to partners monthly, but the bulk of what they get is distributed in quarterly payments in February, June, August and November.
David Gray, the law firm's chief executive, described the tactic as "hard-edged management." Eliminating the scheduled payouts is intended to preserve the partnership's working capital and avoid additional borrowing to obtain funds that partners themselves could provide by meeting the firm's lock-up goals, recounts the U.K. legal publication.
"Although Eversheds is thought to be the first firm to suspend payment of partner profits, it is one of several that have initiated redundancy programmes as they adjust to a tighter economic climate," reports the London Times, referring to layoffs at a number of law firms this year.