Some associates will earn less as gap widens between rich and super-rich law firms, columnist says
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As rich law firms lose ground to the super-rich law firms, their associates will feel the monetary pain, according to a columnist who is a former BigLaw partner.
Writing at Above the Law, lawyer Mark Herrmann says it’s tough for law firms earning $1 million in profits per partner to compete with super-rich firms earning $3 million per partner. Herrmann, a former big-firm lawyer, is chief counsel for litigation and global chief compliance officer at Aon.
Herrmann believes profitability will increase more quickly at capital-markets-focused law firms than at the “merely rich” firms, despite efforts to goose profitability by the merely rich firms.
“This goes beyond merely closing off the partnership ranks to newcomers and discarding the older folks who don’t attract enough business,” Herrmann writes. “Firms have started to reduce (or delay) contributions to pension plans, delay payments to lawyers and creditors, accelerate income, and otherwise use financial engineering to boost PPP. Ultimately, however, you can eliminate a pension plan or postpone the payment of bonuses only so many times; eventually, you run out of one-time fixes.”
The merely rich firms are already paying associate bonuses that are at the lower end of the scale, Herrmann says, and they will find it difficult to match associate salaries if pay starts to rise at the super-rich firms. He predicts the merely rich firms will pay less than the going rate to associates, at least in some cities, and will stop trying to match bonuses paid by super-rich firms.
Herrmann concludes there is a solution for the merely rich firms. “Use a glue other than money to hold your joint together,” he advises.
“People will make remarkable financial sacrifices to stay at jobs where folks enjoy working with each other, feel as though they’re pursuing a collective common good, are recognized for their accomplishments, and respect and like their colleagues,” Herrmann says. “But actually creating collegiality–as opposed to boasting publicly about your uniquely collegial culture–is hard work. It’s not clear to me that many firms are up to the task.”