Another non-equity partnership tier is added to a big law firm as Cleary Gottlieb Steen & Hamilton make a strategic move to join other big law firms in the non-equity partnership ranks.
Cleary’s adoption of a non-equity partnership tier marks a departure from its traditional single-tier structure, where all partners held an ownership stake in the firm and is part of a broader trend in the legal industry, with 85 of the 100 largest law firms now incorporating non-equity partners.
The firm, which boasted 180 partners and generated over $1.4 billion in revenue in 2023, views this move as crucial for strategic growth and talent retention. “Innovating in this way underscores our dedication to developing and retaining talent,” a Cleary spokesperson stated.
Industry-Wide Momentum
Cleary is not alone in this transition. As LawFuel has reported other elite firms such as WilmerHale, Paul Weiss, and Cravath have recently implemented similar changes.
The shift in big law payscale ranking reflects a growing recognition of the benefits of a more flexible partnership structure in today’s competitive legal market.
The Rise of Non-Equity Partners
The ranks of non-equity partners have been steadily increasing, with a 5.3 percent growth in 2023 among the top 100 firms, while the number of equity partners declined. This trend suggests that non-equity partners may soon outnumber their equity counterparts in many large firms.
Strategic Advantages
Adopting a non-equity tier offers several advantages for law firms in the age of highly aggressive pay rate deals and recruitment efforts:
- Talent Retention: It provides a pathway for promising lawyers who may not be ready for equity partnership.
- Financial Flexibility: Firms can offer the prestige of a partner title while managing compensation structures more flexibly.
- Client Perception: Non-equity partners can be billed at higher rates, potentially increasing profitability.
As Cleary implements this change, the legal industry will be watching closely. The success of this model at top-tier firms could influence further adoptions across the sector. However, firms must navigate challenges such as maintaining transparency about partnership tracks and managing expectations among lawyers at all levels.
