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Law Firms Demote Partners as Pressure Mounts Over Profits

Sara Randazzo wsj.com

New York law firm Shearman & Sterling LLP said recently it plans to cull the ranks of lawyers who share in its profits, by demoting some partners to a lower-paid rung of the law firm’s hierarchy.

The move, unthinkable a generation ago, has become a reality of modern-day legal practice.

Faced with client pressure to keep down costs and industry competition to achieve the highest profits, law firms now frequently assess which lawyers are worthy enough for the top rungs of partnership. Those who don’t bill enough hours or bring in enough business are quietly asked to leave or demoted from the so-called equity tier.

In a survey of law firm leaders from late last year by legal trade publication the American Lawyer, 56% said they planned to take away equity from partners in the coming year, and 67% said they planned to ask partners to leave.

“It’s very difficult for firms to deal with this issue,” said Jeffrey Lowe, head of the law firm practice at recruiting firm Major, Lindsey & Africa. “But the business pressure is forcing them to do so.”

Law firms have been demoting and cutting partners since even before the recession, say consultants and others close to the industry. Initial rounds focused on the truly dead weight—partners who enjoyed the title and prestige but didn’t pull in enough revenue.


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