Biglaw

Biglaw Firm's New Partner Compensation Model Leads To Blockbuster Salaries

$11 million a year? That's quite the payday.

By  
on

In 2015 Fried, Frank, Harris, Shriver & Jacobson made some significant changes to the way they handle partner compensation. While the partnership was never lockstep, the changes — which were made to lure lateral talent — have led to a tripling of the nonequity partnership and growing the gap between the highest and lowest paid partner.

According to a report by the New York Law Journal, the firm has moved away from a points system to a target salary for each partner, and that means some blockbuster paydays for the top rainmakers:

Three legal industry sources with knowledge of some Fried Frank compensation details, speaking on condition of anonymity, told ALM that Lawrence Barshay, a top rainmaker at the firm, has lately been paid at least $11 million a year. Barshay, whose book of business is said to be more than $50 million a year, is head of Fried Frank’s asset management practice. (His brother, Scott Barshay, was reportedly paid nearly $10 million after joining Paul, Weiss, Rifkind, Wharton & Garrison from Cravath, Swaine & Moore in 2016.)

Perhaps it is unsurprising given this change, but Fried Frank has picked up some notable lateral talent including finance partner Adam Summers from Cadwalader, capital markets partner Meredith Mackey from Davis Polk, real estate and distressed debt litigation partner Matthew Parrott from Katten Muchin Rosenman, and financial services litigation and enforcement partner Michael Keats from Stroock & Stroock & Lavan.

David Greenwald, chairman of the firm since 2014, has said the changes were designed to reward high achievers and hold those not performing accountable:

“[T]the merit-based approach was largely aligned with the way in which we determined compensation anyway. So it made sense to formalize the process. In doing so, we are strengthening our ability to attract and retain the very best talent. A merit-based system enables us to reward the behaviors we want and to hold people accountable.”

The system winds up being a hybrid black box (and we all know the issues those are alleged to cause) with partners receiving limited information about what their partners make:

Sponsored

[I]nternally, the firm reveals to partners the compensation of its 10 highest-paid partners, as well as pay to partners on the firm’s compensation committee who are not on the top 10 list, attorney sources told ALM. The firm also reveals a scattergram of anonymous partner pay so that partners can see how their pay stacks up against the rest of the partnership.

While firm management may be pleased they can attract laterals under the new system, that doesn’t mean everyone is happy. The ballooning nonequity partnership ranks and the growing disparity between highest and lowest paid partner can breed resentment says law firm management consultant Lisa Smith:

“One of the things that keep managing partners up at night is how do you get the right balance. There is a little bit of a zero-sum game,” she said. Adding the extra money given to star performance has “got to come from somewhere,” Smith said. “That’s what gives some people some pause: Can you have that big of a gap?”

Only time will tell if this change will lead to an exodus of partners from Fried Frank, hoping to find better deals at other firms.

Sponsored

headshotKathryn Rubino is a Senior Editor at Above the Law, and host of The Jabot podcast. AtL tipsters are the best, so please connect with her. Feel free to email her with any tips, questions, or comments and follow her on Twitter (@Kathryn1).

Topics

, , , , ,