Major Partnership Overhaul In The Works At Biglaw Firm

A major law firm considers eliminating its non-equity partner class.

onAugust 10, 2015 at 11:53 AMAugust 11, 2015 at 9:10 PM

The two-tiered, “equity and non-equity” partnership system may soon be a thing of the past at BakerHostetler. A confidential memo, leaked to Above the Law, details a plan approved by the Policy Committee to eliminate the non-equity partnership tier and create a unified partnership. Final approval requires the assent of two-thirds of the current equity partnership at a meeting set for next month.

The memo, sent by chairman Steven Kestner and dated July 1, outlines the proposal with all the corporate buzzwords you’d expect to see:

The Firm is operating in an increasingly competitive and dynamically changing environment. In recent years, many law firms have adopted alternative approaches to partnership structure, particularly Am Law 100 firms with offices in multiple markets. The Firm’s current two-tier structure was put in place in 1992 when we had 480 lawyers across eight offices. Today, we have 930 lawyers in 14 offices, with a significant amount of that growth in recent years. In light of this growth and market trends, the Policy Committee, at its February 2015 meeting, examined partnership structures put in place by other firms and authorized a restructuring committee to be formed to consider whether an alternative partnership structure may be desirable for the Firm.

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And that committee ultimately proposed erasing the structural divide between equity and non-equity partners. No more swirlies in the executive bathroom for the non-equity kids!

There’s also a potential fringe benefit from onboarding more equity partners:

This new approach will impact how our results are reflected in The American Lawyer’s annual survey of law firm performance. The methodology for determining popularly published profits per equity partner (PPEP) generally does not include as equity partners those with less than 50% of their compensation in the form of a profits interest. 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.

Please note: this is not being done to game the Am Law rankings, but this is totally going to game the Am Law rankings.