Why Cravath has joined 'two-tier partner wave'
Cravath, Swaine & Moore has “quietly created” a new partnership tier for nonequity partners who are paid salaries and don’t share in the profits. Image from Shutterstock.
Cravath, Swaine & Moore has “quietly created” a new partnership tier for nonequity partners who are paid salaries and don’t share in the profits, Bloomberg Law reports.
The role of salaried partner was “recently established,” according to an internal memo by Faiza Saeed, Cravath’s presiding partner, which was reviewed by Bloomberg Law.
“After holding out for years, Cravath has decided to join in on the two-tier partner wave,” Above the Law observed.
Law firm consultant Bruce MacEwen told Bloomberg Law that Cravath’s embrace of nonequity partners “is a recognition that the century-old bimodal career structure of law firms has come to the end of its useful life.”
One-tier partnership holdouts include Davis Polk & Wardwell, Cleary Gottlieb Steen & Hamilton, Debevoise & Plimpton, and Wachtell, Lipton, Rosen & Katz.
Mike Parrillo, a New York-based legal recruiter, told Law.com that he knew of the existence of a nonequity partner tier at Cravath at least as far back as 2022. Three anonymous sources who spoke with Bloomberg law said Cravath created the nonequity partner tier in late 2021.
In another break with tradition, Cravath eliminated its lockstep partner compensation system in 2021, which helped it recruit and retain top performers, according to Law.com.
Law.com and Bloomberg Law cited a number of possible reasons for the decision to add nonequity partners. They include:
• Equity partnership pay in BigLaw is being driven higher by a war for star partners. A nonequity tier frees up more money for top performers.
• The number of Cravath partners has increased, while associate ranks declined, “possibly putting a strain on partnership profits,” Law.com said.
• Having a nonequity partnership tier will help Cravath compete for counsel-level lawyers and senior associates who are considering other firms.
• The nonequity tier will allow promotions for lawyers who don’t generate a lot of business.
• Cravath is adding lawyers to its Washington, D.C., office, and a nonequity tier helps the firm recruit government lawyers without books of business.