Long-standing equity partners at the country’s major law firms are increasingly being tapped on the shoulder this year, as partnerships move to euphemistically “manage the equity” to counter shrinking revenues.
Legal recruiters say that giving underperforming partners the quiet nudge has ramped up in the past three months – particularly in M&A - and the bar on making budget has been set higher. Equity partners are being tapped or being made “fixed draw,” or salaried, partners.
In one high-ranking firm alone this year about a fifth – or 30 – of its equity partners were asked to leave or demoted for underperformance.
Malhab Recruitment managing director Katherine Sampson says partners are only as good as their last year of billings. Those over 50 years of age are the main group being targeted, she says.
“Money is tighter and you are seeing a rationalisation of equity,” Sampson said. “Partners are fearful the money they are used to earning will start to go down and that’s when the claws come out.”
It is understood to be happening at all the major firms, pressured by a movement across the corporate sector to beef up their in-house offerings. In some partnerships, 20 per cent of equity partners will be asked to leave before the financial year is out, partners at top tier firms say.
“The approach with long-standing partners has been to pull on the heartstrings a bit, and say ‘you’ve given us a fantastic service but it’s time to go, you’re costing us money’,” Sampson said. “You are starting to see partners say ‘you can’t tap me.’ But life can be made very unpleasant at a firm for someone who is told they are not welcome," she said.