According to a new survey conducted by legal search consultant Major, Lindsey & Africa and Am Law Daily affiliate ALM Legal Intelligence, partners at Am Law 200, NLJ 350, and American Lawyer Global 100 firms saw their annual compensation rise, on average, 6.4 percent to $681,000 over the past two years. The jump was apparently driven, at least in part, by an uptick in the average rate those partners are billing, from $555 per hour in 2010 to $585 today.
The survey, which drew 2,228 responses from attorneys at the firms in question, shows that not all partners have benefited equally from the increase. On average, equity partners are better compensated than their non-equity counterparts, male partners make more than their female colleagues, corporate partners earn more than litigators, and partners in open compensation systems are paid better than those in closed compensation systems.
The disparity in pay among partner classes is one of the survey’s most compelling findings. Equity partners, who accounted for 62 percent of respondents, have seen their compensation increase a robust 11 percent, from $811,000 in 2010 to $896,000 this year. Conversely, the average compensation for nonequity partners stayed flat, going from $336,000 in 2010 to $335,000 this year.
“Rainmakers are demanding more money and are getting it because firms are afraid they’ll leave,” says Jeffrey Lowe, the global practice leader of Major Lindsey’s law firm practice and the author of the survey.
Not surprisingly, equity partners are much happier with their compensation than their nonequity counterparts. Overall, 27 percent of all respondents described themselves as “very satisfied” with their total compensation—a slight increase over the 24 percent who described themselves that way two years ago. But when divided by partner class, the slice of those who are “very satisfied” jumps to 36 percent among equity partners and falls to 12 percent among nonequity partners.
In fact, nearly one-third of all nonequity partner respondents described themselves as “not very” or “not at all” satisfied with their total compensation, compared to just 15 percent of equity partners. “There’s less left for service partners,” says Lowe. “It’s a zero-sum game.”
Women partners also lag substantially behind their male counterparts, according to the survey. Not only are they making less, as was the case two years ago, they appear to be losing ground. In 2010, the first year the survey was conducted, there was a $162,000 difference between male and female partners’ compensation, with male partners averaging $675,000 per year and female partners averaging $513,000. According to this year’s survey, the divide has grown 46 percent. Male partners now earn an average of $734,000 per—an increase of more than 8 percent since 2010—while female partners are paid $497,000 (a 3 percent pay decrease since 2010).
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The differences don’t end there. Despite racking up more billable hours, litigators earn less than their corporate peers, according to the survey. Though litigators clocked an average of 1,792 hours, compared to 1,518 for corporate partners, their average compensation stands at $634,000—$213,000 less than the average paid to corporate partners. And that gap has grown substantially over the past two years. In 2010, litigators ($679,000) averaged just $80,000 less in average annual compensation than their corporate counterparts ($759,000).
On another front, the compensation divide between partners working in closed compensation systems, in which they don’t know what their colleagues are paid, and partners working in open compensation systems has also increased. In 2010, open system partners’ compensation outpaced closed system partners by 45 percent. In this year’s survey, open system partners received 74 percent more compensation on average. (Partners in open systems in 2012 averaged $810,000 in total compensation, while partners in closed systems reported an average of $465,000. The total compensation of partners in a partially open system averaged $515,000.)
Major Lindsey’s Lowe contends that some of the difference between those two groups can be attributed to the responses of partners in open systems, who are reporting significantly larger books of business than their closed system peers.
This year’s survey also highlights the increasing importance of generating business, especially as it relates to compensation decisions. Sixty-five percent of respondents said that originations were the most important factor for determining compensation decisions, while “working attorneys receipts” was a distant second, cited by just 21 percent of respondents.
“Partners recognize not only that origination is becoming important but that other factors like seniority and good citizenship are becoming less important,” says Lowe. He points to survey results that show 52 percent and 45 percent of respondents, respectively, perceive seniority and good citizenship as less important in compensation decisions.
Partners of all classes and genders were united on one front: They all think they should be making more money. Fifty-eight percent of all partners said they should be better paid, and among that group, an overwhelming majority wants something more than a token raise. Ninety percent of the survey’s respondents thought that their compensation should be increased by more than 10 percent, while 1 percent thought their pay should be doubled.