BigLaw firm switches from strict lockstep compensation for partners to modified system
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Davis Polk & Wardwell is changing to a more flexible compensation system, allowing it to pay more money to retain and attract rainmaking partners.
Neil Barr, managing partner at Davis Polk, told Bloomberg Law that the firm concluded that its lockstep system “was simply not compatible with our strategic designs going forward.”
“We would like to be a more growth-oriented platform and bring on and promote lawyers that can continue to support our clients in our core practices,” Barr said.
Only a few elite New York firms retain a strict lockstep pay structure, according to Bloomberg Law. Other firms that have used a lockstep system include Cravath Swaine & Moore, Cleary Gottlieb Steen & Hamilton, and Debevoise & Plimpton. Those firms typically were most profitable, enabling high partner compensation.
Such firms may be vulnerable to partner poaching, however, by law firms that are able to pay more money for top talent.
Cleary Gottlieb has reportedly taken steps to modify its lockstep structure, Law.com reported in May. Debevoise, meanwhile, decided to keep its lockstep system.
John Coffee, director of the Center on Corporate Governance at Columbia Law School, said Cleary Gottlieb is not the only firm to make the change. His understanding is that a number of law firms “have reexamined their compensation system and have loosened their lockstep,” he told Law.com in May.
Davis Polk gave a statement to Law.com and Law360 emphasizing that “the entirety of a partner’s contributions” will be considered under the new system.
Contributions that will be rewarded include those made “on behalf of clients and in support of firm priorities, including associate development, mentorship and diversity and inclusion initiatives,” the statement said. “We are committed to investing in practices and lawyers that contribute to the strategic growth of the firm and to our strong, deeply collaborative, exceptional culture.”