The compensation landscape at major law firms is changing faster than a lawyer's billable hours during tax season. If you thought partner compensation was already in the stratosphere, the upswing has just begun – with changes like the “black box” compensation structure, new non-credit tiers, different bonus pools and other changes taking the profession into a new galaxy of Bring green.
Gone are the days when lockstep pay was the gold standard. Now it's all about flexibility, performance and cash. More than a third of the nearly 200 anti-money laundering law firms plan to revamp their compensation models for equity partners in the next two years, sources said American lawyer.
We're talking about expanding the salary range beyond the judge's robe and examining performance criteria with the intensity of cross-examination.
To quote the Citi Hildebrandt Client Advisory 2025: “More than a third plan to make changes to their equity partners’ compensation models in the next two years, either by expanding the compensation range or by reviewing the criteria used to assess compensation levels.”
The compensation arms race
Top partners are currently seeking payouts of $25 million to $30 million, and that's a bubble that most analysts and advisors don't see bursting any time soon.
The trend toward “black box” compensation has continued to grow despite a lack of transparency and criticism regarding its impact on company culture.
The “millionaire-making” partner compensation packages are helping to disrupt the top-level recruiting market.
Companies are creating “super” tiers and non-equity tiers at a rapid pace. Consider that Cravath Swaine & Moore, the ultimate white-shoe Big Law firm—and top performer in the LawFuel Prestige Rankings—has moved into a nonequity tier after breaking the incontrovertible—the lockstep partner compensation model, the perennial one , loyal service rewarded.
Where Cravaths go, others follow – Wilmer Cutler Pickering Hale and Dorr and Cleary Gottlieb Steen & Hamilton have gone the Nonequity route. Even the recent Big Law merger that created A&O Shearman is upending the firm's salary structure.
Simpson Thacher & Bartlett has distributed its partner earnings, with its highest-paid partners hitting the $20 million payday rate. Davis Polk & Wardwell are seeking a restructured compensation system that Weil, Gotshal & Manges have already revised.
And over at Latham & Watkins, one of the biggest big law firms, there's talk of a new tier of “super points” to reward top partners, such as one of the few London-based top-tier partners, Richard Trobman , (pictured) who take home the Lathams' big cash payouts, with most of Latham's other top earners based in the US.
According to a report in legal transaction 20 Latham & Watkins partners are in the “super points” range. An L&W spokesperson said of the new major statutory pay scale for the firm: “Changes to the company's equity compensation structure were made after an in-depth review and extensive discussions and meetings in each office to ensure a transparent and thorough process. This provided management with an opportunity to receive direct feedback from the partnership before moving forward. “The changes to the company’s compensation structure will allow the company to reward more partners in its year-end bonus process.”
One reason for these changes – perhaps even the main reason – is increasing partner poaching, as partners move to get better pay at other companies. Many of the partner compensation changes are occurring at firms that have lost partners to rival firms.
Show Me the Money: Bonus Pools and Black Boxes
Bonus pools are no longer just a drop in the ocean. They are swelling to oceanic proportions, with some companies committing up to 25 percent of their net income to bonuses. For high achievers, every day is like Christmas!
While some companies take the “black box” approach (we’re looking at you, Paul Weiss), others set crystal clear standards.
Do you want to play in the big leagues? It's better to have at least $5 million in sales, otherwise your affiliate points could disappear faster than evidence in a paper shredder.
Big, paying, big law firms
Top major law firms in the US by profit per equity partner
The following ranking highlights the top American law firms based on their Profit per equity partner (PPEP) for the year 2023 taken from American lawyer Statistics – PPEP is an important metric often used to evaluate a company's financial performance.
The list focuses on the top 100 law firms by gross revenue, meaning firms with higher PPEP may not appear here if they are not in the Global 100 by revenue.
Rankings 2023: Profits per equity partner
| rank | company | 2023 PEP | Investment partner |
|---|---|---|---|
| 1 | Wachtell, Lipton, Rosen & Katz | $8,507,000 | 90 |
| 2 | Kirkland & Ellis | $7,955,000 | 539 |
| 3 | Quinn Emanuel Urquhart & Sullivan | $7,270,000 | 185 |
| 4 | Susman Godfrey | $6,989,000 | 90 |
| 5 | Paul, Weiss, Rifkind, Wharton & Garrison | $6,574,000 | 178 |
| 6 | Simpson Thacher & Bartlett | $6,433,000 | 198 |
| 7 | Sullivan & Cromwell | $6,250,000 | 173 |
| 8 | Davis Polk & Wardwell | $6,200,000 | 174 |
| 9 | Cravath, Swaine & Moore | $6,050,000 | 92 |
| 10 | Gibson, Dunn & Crutcher | $5,587,000 | 317 |
| 11 | Latham & Watkins | $5,516,000 | 544 |
| 12 | Skadden, Arps, Slate, Meagher & Flom | $5,403,000 | 334 |
| 13 | Paul Hastings | $5,395,000 | 166 |
| 14 | King & Spalding | $5,331,000 | 191 |
| 15 | Mileage bank | $5,114,000 | 166 |
| 16 | Weil, Gotshal & Manges | $4,645,000 | 180 |
| 17 | Sidley Austin | $4,592,000 | 266 |
| 18 | Ropes & Gray | $4,514,000 | 291 |
| 19 | Sure Gottlieb Steen & Hamilton | $4,509,000 | 180 |
| 20 | Fried Frank | $4,355,000 | 114 |
This table highlights the financial strength and profitability of these elite law firms in the US
The Lateral Shuffle: Dance or Die
The side market is hotter than a summer colleague's coffee order. Companies go out of their way to attract top talent by offering fixed compensation packages and stock that would make a Wall Street banker blush.
Capital contributions: The entry price
But it's not all champagne and caviar. Partners may have to dig deeper into their Armani pockets to obtain capital contributions. Because if you want to play, you have to pay.
The conclusion
As Jon Lindsey of Major, Lindsey & Africa puts it: “There is essentially no business immune to market pressures, with very rare exceptions.” The legal world changes faster than a witness under cross-examination, and those who don't keep up could object to their own aging.
As you navigate this brave new world of partner compensation, remember: In the game of Big Law, you either win or you're sidelined. May the odds always be in your favor.