The lateral partner market is heating up. We know that more and more firms are changing their partnership rules to create flexibility in order to make sweet deals to entice big-time rainmakers to join their ranks. But what about the inverse? What are Biglaw firms doing to *keep* their partners right where they are in this thriving market?
According to reporting by Law.com, it isn’t all carrots to encourage folks to stay put. The richest law firm in the world — Kirkland & Ellis — is using the proverbial stick to keep their partners in-firm. The firm is reportedly changing the policy with regards to departing equity partners — they’re now keeping up to 55% of a partner’s compensation hostage.
While equity partners at the firm already had 55% of their annual compensation deferred until the following year, the new policy allows Kirkland to keep the accrued compensation at the firm’s discretion.
Kirkland declined to comment on the new policy, which also reduced the notice period for departing equity partners from 120 days to 60 days. It also shortens the period of time Kirkland has to pay capital contributions back to departing equity partners from 12 months to three months.
Of course, this drastically changes the risk/reward calculations for partners looking to exit. Because the accrued compensation could equal millions of dollars left on the table, and someone — whether it’s the departing partner or the firm they’re moving to — will have to take the hit.
This does reflect on a firm’s internal culture, not that Kirkland was ever known as a warm and fuzzy firm. But as Sabina Lippman, cofounder of recruiting firm Lippman Jungers, says, “It suggests a little more insecurity on the part of the firm, and a very transactional relationship to have with a partner. For firms that decide to have a certain point in which a partner is made whole, they would like to preserve a brand in the community that says: people are here because they want to be, not because they can’t afford to leave.”
At least Kirkland is shortening the amount of time they’ll pay make a departing partner’s capital contribution. But overall, the new policy creates some real financial issues for partners looking to leave.
Kathryn Rubino is a Senior Editor at Above the Law, host of The Jabot podcast, and co-host of Thinking Like A Lawyer. 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 or Mastodon @[email protected].