Biglaw

MoFo Revamps Its Partnership: The Number Of Equity Partners Drops 25 Percent As The Firm's Nonequity Ranks Soar

The (equity) partnership is shrinking.

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Partnership at Morrison & Foerster doesn’t mean what it used to. In a statement to ALM about the firm’s 2018 financial performance, MoFo revealed that they’ve made some big changes to the way partners at the firm get compensated:

“Morrison & Foerster modified its partnership compensation structure at the start of 2018,” said the firm’s statement. “The modifications followed a year of consultation with our partners and was made to ensure that the compensation model further advances the strategic needs of the firm.”

And, as Law.com reports, this has led to a shift in which partners count as equity partners (defined as partners who get more than 50 percent of their total compensation from profit draws):

As a result of the compensation modifications, the firm’s equity partner count fell to 167 from 224—a 25 percent decline. Meanwhile, the firm’s nonequity partner ranks swelled 50 percent to 129 from 86. The firm’s total partner count, including equity and nonequity partners, fell 4.5 percent.

And that means that even as revenue dropped in 2018 — down 1.9 percent to $1.04 billion — their profits per equity partner (PEP) are up to just under $2 million, compared with $1.74 million the year before. That’s some fancy math-ing to keep your numbers looking pretty.

Despite what seems like some pretty straightforward de-equitization, Larren Nashelsky, chair of the firm, has a different take:

Despite the drop in equity partnership, Larren Nashelsky, Morrison & Foerster’s New York-based chairman, said in an interview the firm had not “de-equitized” partners as part of the compensation review. “There has been no radical change in our partnership,” Nashelsky said. “It is really, over the last few years, strengthening and improving the performance of the partnership and our leverage and profitability.”

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And yet, for the last six years in a row, the equity partnership headcount has declined.

Nashelsky said the firm isn’t looking to compete with other Biglaw firms:

“We are not in an economic arms race with other firms,” Nashelsky said. “We have a special place at Morrison & Foerster. We take stock of a lot of things when we think about the kind of firm we want to be. Financial performance is one of them. So is giving back. So is excellence in lawyering. So is diversity and inclusion, and so is representing the world’s leading companies.”

But the firm had its best PEP performance in 2018.

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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).

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