The Big Law Pay Structure Upset
Albert Goodwin, LawFuel Big Law editor
Big law pay structure moves have been very much in the news of late, but now a move but A&O Shearman has bucked a recent trend by big law firms towards a salaried partner tier by having a full all-equity pay model.
A&O Shearman has introduced a three-tier modified lockstep compensation system for its partners, moving towards an all-equity partnership structure.
The move follows the ‘game-changing’ merger of Allen & Overy and Shearman & Sterling, completed in May 2024.
The New Partnership Pay Model
The new partner pay model unveiled by the A&OShearman leadership team categorizes the firm’s approximately 800 partners into three distinct levels, entry, core and super.
What makes a ‘super’ partner at A&O Shearman?
Money, of course.
The “super” tier is reserved for the firm’s top performers, affectionately (or enviously) dubbed “highflyers” by insiders at the firm.
The firm’s pay structure aims to strike a balance between rewarding exceptional talent and fostering a collaborative environment.
The adoption of an all-equity partnership model would be a major shift for the firm’s predecessor firms, which previously had both non-equity and salaried partner tiers.
Cravath made some news with their ‘black box’ pay model, a non-transparent pay model that rewards the big money star earners but can lead to confusion and obfuscation over how big law pay is handled.
The firm’s transition to a full equity model goes against the current trend in Big Law, where many firms are embracing salaried partner tiers.
Cleary, Gottlieb, Steen & Hamilton recently added a non-equity tier, citing the need for “innovation and adaptation” in the legal industry.
The traditional pay modes have been the lockstep model, based purely on seniority and which is certainly falling from favor, and the ‘eat what you kill’ model which provides special payments for the higher earners.
The new system that A&OShearman are developing allows for greater flexibility in rewarding top performers while maintaining some elements of the lockstep structure.
Strategic Implications
A&O Shearman’s spokesperson said that the new remuneration approach is designed to enhance the firm’s competitiveness in attracting and retaining top talent while promoting collaboration.
The firm’s strategy aligns with broader industry efforts to reward high performers through bonus structures and “super-pointer” tracks and the like.
And evidently younger partners are encouraged by the prospect of moving up the tier-scale to bigger money paydays.
A&OShearman Changes
The hig law pay overhaul at A&OShearmanis part of a larger series of changes at A&O Shearman, which includes a planned reduction of around 10 percent in their equity partnership – with almost 4000 lawyers in the merged firm.
They recently closed the firm’s Johannesburg office, which created considerable negative publicity from former staffers and others, describing the move as ‘incredibly distasteful’.
They are also closing the firm’s consultancy practice.
