Luke Gordon* was in his 50s and had been working at his law firm for nearly two decades when the firm removed him from the equity partnership, put him on a limited contract — renewed at the firm's discretion — and slashed his income.
Gordon, who was demoted along with several other partners, still had the same clients and had to work the same number of hours. He wasn't treated poorly by his colleagues after he lost his equity status, and a couple of partners even told him they were upset by the news. But there was nothing they could do.
For Gordon, the experience was “unpleasant and outrageous.” For his colleagues, it was easier to ignore the elephant in the room.
De-equitization used to be an option law firms reserved for attorneys late in their careers who still sought to be part of the firm but no longer wanted to put up capital contributions or partake in all of the firm votes as they prepared for retirement. In recent years, particularly since the recession, an increasing number of firms have been de-equitizing partners who may still be in the middle of their careers but are not meeting billable hour or business origination targets year after year.
"As the legal industry has evolved from law firms to law businesses, more value is placed upon creating revenue and bringing in new clients," said Jeffrey Liebster, a partner in Major, Lindsey & Africa’s partner practice group in New York. "Everyone feeding off of institutional clients is a luxury very few can afford."
Clients are less loyal and more bottom line-oriented, putting firms under more pressure to be productive, Liebster said.
"If firms are using it to boost their Am Law rankings, that's a dangerous strategy because such firms run the risk of a major negative impact on their culture," Liebster said.