Dewey & LeBoeuf has confirmed that 66 partners–about one in five of the firm’s 350 partners–have seen their compensation reduced by as much as 80 percent over the past 15 months. The reductions are meant to weed out less-productive partners, firm chair Steven Davis tells The Am Law Daily.
Those affected by the “substantial performance-related reductions to their compensation” represent a wide range of practices, Davis says. The partners include some who have been practicing for 25 or more years.
Of the 66, the more fortunate are now taking home $25,000/month, the standard draw for partners. Lower-tier partners have faced more drastic reductions, with monthly draws of as little as $10,000, or an annual total of $120,000–$40,000 less than the starting salary for a 2008 incoming first-year.
Both Davis and executive director Stephen DiCarmine characterize the recent actions as an intensification of the firm’s long-term strategy of replacing poor performers with higher-producing laterals. “We have a merit-based compensation system,” Davis says. “There are a variety of outcomes that people have experienced. It probably occurred to a greater and enhanced extent due to the merger.” (Dewey Ballantine and LeBoeuf, Lamb, Greene & MacRae merged in October 2007.)
Davis and DiCarmine agreed to discuss the matter on the record when contacted for comment, after The Am Law Daily was tipped off to the news.
The bad news doesn’t end with the draconian hair cuts, according to three current and three former partners, who spoke only on condition that they not be identified by name. These lawyers say that some Dewey partners have received only 60 percent of the total annual compensation (monthly draw plus profit share) that they were told to expect last March. These sources assert that a third and smaller group of star rainmakers and executive committee members have special compensation “guarantees,” and, as such, have not been affected by the reductions.
Davis disputes these assertions. He confirms that some partners have been paid just 60 percent of expected compensation, but insists that the majority of partners have earned what they expected. Davis also says there are no compensation guarantees, but rather that the firm rewards superior performance.
Like so many Am Law 100 firms, Dewey has had to enact significant cost-cutting measures this past year. Several Dewey offices have been shuttered, including Jacksonville, Florida; Austin, Texas; and Hartford, Connecticut. In early March the firm announced that 100 staff and 15 lawyers in the London office were laid off. In December, Dewey cut 12 associates in the structured finance group; and eight associates from the Los Angeles office were let go in January. Another few dozen have been terminated via what DiCarmine calls a regular performance-review process. Administrative staff cuts and office closings are expected to save Dewey $125 million in 2009, DiCarmine says.
As for the 66 partners, Davis says the firm has decided not to enforce any departure dates, recognizing the challenges presented by the current job market. A majority of the partners affected have stayed on at the firm, some for as long as 15 months, since being informed of their compensation changes. Despite the move, DiCarmine says, “we haven’t lost that many partners.”