Jay Clayton, a partner at Sullivan & Cromwell, is at the top of his game and it says something about being a partner in BigLaw.
Nominated by President Trump to head the Securities and Exchange Commission, Clayton will take a big pay cut to accept the job but will earn the prestige that goes with it. The financial disclosures that are part of the transition, however, offer a glimpse inside the oft-guarded secrets of partnership compensation.
According to the disclosures, Clayton has earned $7.62 million since 2015. That represents his "partnership share for 2016 and 2017 received up to the date of filing," which was in January.
With partner profits of about $3.86 million annually per partner in 2015 at the firm, plus another $500,000 to $1 million in undistributed partnership shares still due Clayton, it's fair to say that equity partner compensation is well and good enough at BigLaw.
Well and Good Enough
Pay has improved across the board for partners and associates at BigLaw in recent years. After a downturn in the economy, big firms announced increases in starting salaries for new associates to about $180,000 last year and bonuses of up to $100,000 for seasoned associates at the end of the year.
On the other hand, BigLaw does not announce partnership salaries so routinely. Occasionally, the information comes out in a law firm break-up or with mandatory disclosures such as Clayton's. It was especially difficult to figure out during the down years, but some trends emerged.
The New York Times revealed that BigLaw firms were culling partners by not promoting associates or by naming more non-equity partners in the downturn. According to the report, nonequity partners at the largest firms tripled over a 15-year period and made up slightly more than 40 percent of all partners by 2014.
Still Healthy for Non-Equity
While the the number of equity partnerships has decreased, the non-equity partners still have made healthy salaries. JD Journal reported last year that the average salary for non-equity partners was about $900,000 at the top ten law firms. Quinn Emanuel topped the list with $1,077,586 per non-equity partner.
However, cutting back on equity partners while rewarding non-equity partners plays out in rainmaking. Non-equity partners may not share in profits, but equity partners have to bring in more business to earn more profits.
"A big risk for law firms to move in this direction is the amount of money coming straight out of the firm's net income," the Journal reported. "When partners earn their income based on the profits of the year, they are more motivated to make sure the firm is going to have a big income to receive from."