Payday Partners In Deep Cover
Albert Goodwin, LawFuel contributor
It sounds somewhat sinister, but the ‘black box’ pay system for partner remuneration model that is being used by some big law firms is gaining attention and momentum.
In an age of transparency – supposedly – the ‘black box’ model requires deep cover and belies the ages-old remuneration method such as the lockstep system, so favored by biglaw firms for so long – but now losing favor to a large extent.
American Lawyer described the system as a ‘hand-me-down’ for the 1990s and major law firms like Linklaters have given up on it.
But is the ‘black box’ pay system the answer?
The system rewards star partners in particular in a manner that is intended to prevent discontent among the partner ranks, but serves as a nontransparent system permitting law firms the ability to both retain and attract legal talent with big paydays.
The model contrasts with more transparent or formula-based compensation systems where the criteria for pay are clearly defined and understood by all members of the firm.
The secrecy surrounding the black box model can be so profound that some partners may not even know how their own compensation is determined, as the American Lawyer reported.
A recent devotee of the black box pay system is Paul Weiss who have moved away from what was already a modified lockstep compensation model to the black box.
According to reports the moves by Paul Weiss are reflecting the firm’s attempts to alleviate tensions among partners, especially as the firm expands the compensation spread while making substantial investments in recruiting and retaining rainmakers from rival firms.
Paul Weiss’ Black Box Moves
In 2023, for instance, Paul Weiss successfully recruited three transaction partners from Kirkland & Ellis, who were rumored to have earned $20 million in annual pay on huge payday deals.
Although Chair Brad Karp (pictured) has not directly addressed these reports, he has previously emphasized the firm’s commitment to maintaining its competitive edge by adapting its partner compensation system to changing market dynamics.
“We are not doctrinaire, and we have adjusted our system in recent years to deal with changing market realities and to maintain our competitive edge,” he said.
Part of Paul Weiss’s new strategy involves enlarging the bonus pool for partners. This approach allows the firm to swiftly respond to fluctuations in profitability within specific practice areas without altering partners’ shares within the compensation system.
The idea is for star partners to get the compensation that reflects their magnetic powers to attract top work or achieve top results.
Joining Paul Weiss in adopting a black box approach to partner compensation are other top firms like Ropes & Gray, Fried Frank, and Jones Day.
Moves by major law firms to adopt the black box pay model reflects their need to move adroitly to both recruit and retain their major law stars, even if the paydays remain locked in a black box model that only the stars know.
The fact that there may be sideways looks, rumors and possible dissention among the rank and file is an issue yet to be addressed by big law firms, it would appear.
