Tag Archives: Partner Issues

Who Is Better Compensated: Elite Biglaw Partners Or Top General Counsel?

If you’ve paid any attention to the ballooning compensation figures of Biglaw partners in recent years, you already know that it pays to be an equity partner at a large firm. Meanwhile, as average partner compensation escalates, top in-house lawyers are being left behind.   

In 2020, a Major Lindsey & Africa survey of partners in “Am Law 200 size firms” found average compensation of above $1 million. The ALM Intelligence 2020 Law Department Compensation Benchmarking Survey found general counsel and chief legal officers earned average total compensation of $573,000. So, as a general rule, it’s more lucrative to be a Biglaw partner than a general counsel.

But what about at the very top end of the profession? In this article, we take a look at the pay packages of the top 100 highest-paid general counsels, in comparison to partners of top Biglaw firms (as measured by profits per equity partner). We find that on a cash compensation basis, equity partnership is more lucrative than being a general counsel. But the story is more complicated when taking stock options into account.

A quick note on sources. For general counsel compensation data, we look at the top 100 highest-paid GCs as listed in the 2020 ALM Intelligence GC Compensation Survey. This data set is not comprehensive. For one thing, ALM compiles its data from proxy statements filed with the SEC, so only public companies are included. Our source for Biglaw partner compensation is the 2020 edition of the Am Law 200 ranking.

It’s hard to outearn a top Biglaw partner

The General Counsel Compensation Survey ranks general counsels based on total cash compensation. The top 100 highest-paid GCs earned total cash compensation of $2.42 million on average. We don’t know how much the 100 best-paid Biglaw partners earned in the comparable period, but we can say that the top firm in the Am Law ranking — Wachtell — had 85 equity partners and profits per partner of $6.33 million.

Just two general counsels took home cash compensation higher than $6.33 million: Alan Braverman of Disney ($8 million) and Eric Grossman of Morgan Stanley ($6.94 million). Meanwhile, 38 Am Law firms had profits per equity partner in excess of the $2.42 million average general counsel cash compensation.

How does this compare to the situation a decade earlier? Analyzing the 2010 editions of the same surveys, we find that not much has changed. Based on the 2010 General Counsel Compensation Survey, the top 100 general counsels took home average total cash compensation of $1.56 million. Wachtell’s profits per partner were $4.3 million, a figure exceeded by just one general counsel. 28 Am Law firms had higher profits per equity partner than the $1.56 million general counsel average.

What about compensation growth over that ten-year period? From a growth perspective, who did better: the top 100 general counsels or the partnership of the top Am Law firms? The table below shows the results, ranked by growth rate. The law firms in the table were the top 10 firms in the 2010 Am Law 200. We see that general counsels fall in the middle of the pack, outpacing some partnerships and trailing others.

Group (equity partnership or GCs)10-year compensation growth
Kirkland & Ellis108%
Simpson Thacher83%
Paul, Weiss75%
Cravath63%
Sullivan & Cromwell57%
Top 100 GCs55%
Cahill Gordon51%
Wachtell47%
Quinn Emanuel46%
Boies, Schiller17%
Irell & Manella8%

But stock options can make a big difference

The comparisons above obscure some important factors. On the in-house side, it is critical to note that the very highest-earning general counsels receive a substantial portion of their compensation in the form of equity. Taking stock options into account, some general counsel roles start to look considerably more attractive. For example, revisiting the 2020 surveys, when accounting for equity compensation, the number of general counsels topping Wachtell’s profits per partner rises from two to 41. And some of the general counsels have total compensation that would exceed that of even the highest-paid Biglaw rainmaker. For example, Chewy GC Susan Helfrick had total compensation of $30.3 million (of which less than $1 million was in cash). Apple GC Kate Adams had cash compensation of $3.56 million, but her total compensation was $25.2 million.

On the law firm side, profits per equity partner gives little indication of the rewards that flow to top rainmakers. Firms vary widely in their compensation ranges. At the most traditional end of the spectrum, a firm’s highest-paid partner might take home 4x the pay of the lowest-paid partner. In contrast, at a firm with a strong eat-what-you-kill culture, that ratio may be 10x or higher. A 2018 New York Times article about the lateral talent wars reported on eight-figure pay packages for star hires at firms like Kirkland & Ellis and Paul, Weiss. It’s impossible to know how many Biglaw attorneys have breached $10 million, but the lateral market for partners with a strong book of business remains red hot.

Conclusion

There are a lot of reasons why an attorney might prefer to be a general counsel than a law firm partner. But viewed strictly through the lens of compensation, high-performing lawyers are typically better off staying on the law firm track. Of course, that doesn’t necessarily mean they should stick with their current firm. With Biglaw partnerships increasingly diverging in their approaches to compensation, it’s a mistake to assume that a partner with a given book of business will be paid similarly at any comparably prestigious firm. Productive partners have a variety of options — and it pays to know about them.

A Deep Dive Into The 2021 Am Law 100 Rankings

Last year was a difficult year for so many industries but a shockingly good one for Biglaw, at least in terms of metrics like gross revenue, revenue per lawyer, and profits per partner.

“Lawyers are terrible businesspeople.” You’ve surely heard this before. But is it true?

If lawyers are so bad at business, then why did the Am Law 100, the nation’s 100 largest law firms ranked by revenue, have such a banner year in 2020? In the midst of a global pandemic and economic downturn — one that hammered so many industries, from airlines to hospitality to commercial real estate– Biglaw firms flourished.

Last week, the American Lawyer issued its eagerly anticipated Am Law 100 rankings for 2021. As a group, here’s how the Am Law 100 fared in 2020 (as noted by Dan Packel in his excellent analysis of the data):

  • Total revenue: $111 billion, up by 6.6 percent.
  • Average revenue per lawyer: $1.05 million, up by 5 percent.
  • Profits per equity partner: $2.23 million, up by 13.4 percent.

Who are you calling a terrible businessperson now? These growth rates exceeded those posted by the Am Law 100 in the far more normal year of 2019 (which were 5 percent, 3 percent, and 5 percent, respectively, for total revenue, RPL, and PPEP).

What drove the dramatic increase in profitability? Yes, cost-cutting did play a role; firms used the pandemic as an opportunity to make themselves more efficient, eliminating or reducing various expenses that they were already planning to cut (e.g., certain administrative roles, real estate costs, etc.).

But, at least collectively, the Am Law 100 didn’t juice their profits by slashing lawyer or even equity-partner headcount. Total attorney headcount actually grew slightly, rising by 1.7 percent to 105,718, and the number of equity partners remained flat (down by just 12 partners, to a new total of 21,258).

Let’s now take a closer look at the three key metrics — gross revenue, revenue per lawyer, and profits per partner — and the top 10 firms in each category.

Gross Revenue

Here are the top 10 firms in the 2021 Am Law 100 rankings, ranked by their gross revenue in 2020. You can access the full list here.

Kudos to Kirkland & Ellis and Latham & Watkins, once again the two top-grossing firms, which both grew their total revenue by double digits. All of the other top-ten firms also increased their revenue, except for Baker McKenzie, which saw a slight dip (perhaps due to the global nature of the firm; the U.S. legal market generally performed better than overseas markets last year).

As you can see, there wasn’t much change in terms of the rank order of the firms. Everyone kept their 2020 spots except for White & Case and Hogan Lovells, who swapped places; now White & Case is #8 and Hogan Lovells is #9.

In 2020, 42 firms enjoyed gross revenue in excess of $1 billion, one more than the 41 firms in 2019. Almost three-quarters of the Am Law 100 — 74 firms, to be precise — grew their gross revenue. On the strength of its capital markets practice, Davis Polk had the biggest gain, a whopping 22.6 percent. (For more on how Davis Polk pulled off such a great financial performance, see this Bloomberg Law piece by Roy Strom.)

Revenue Per Lawyer

Here are the top 10 firms in the 2021 Am Law rankings based on revenue per lawyer. You can access the full list here.

As you can see, revenue per lawyer grew quite nicely among the top ten, with four firms posting double-digit growth. Once again, Wachtell Lipton and Sullivan & Cromwell took the top two spots — but Davis Polk zoomed up from #10 to #3. Two other firms known for strong capital markets practices, Cahill Gordon and Debevoise & Plimpton, also posted strong gains, breaking into the top 10.

Profits Per Equity Partner

And now, everyone’s favorite ranking: the top 10 firms by profits per equity partner. You can access the full list here.

As usual, Wachtell Lipton took the #1 spot, with an incredible $7.5 million in PPEP. But Kirkland & Ellis, in recent years the #2 firm, got bumped out of second place by Davis Polk, with $6.35 million. If 2021 turns out to be like 2020, it’s conceivable that Davis Polk could displace Wachtell as #1 in next year’s rankings (but based on the strong year that M&A is having so far, I wouldn’t necessarily count on that). As for the rest of the top ten, there wasn’t that much movement, except for the ascension of Cahill and Debevoise (which the revenue per lawyer rankings hinted at).

Taken collectively, the Am Law 100 performed well in terms of profitability. As the American Lawyer reports, average PPEP increased by 13 percent in 2020, and 56 firms enjoyed growth rates of at least 10 percent, compared to just 23 in last year’s rankings. So congratulations to Biglaw on its big success in 2020 — a year that was, to put it mildly, extremely challenging for so many of us.

Moving on from the rankings, I’d like to close with a personal announcement. As mentioned in passing in this New York Times piece by media columnist Ben Smith, I’m returning to full-time writing as of next week. I’ve enjoyed recruiting, but one thing I’ve learned about myself over this crazy past year, including my near-death experience with Covid-19, is that writing is what I truly love.

Back in December, I launched a new publication about legal affairs called Original Jurisdiction. I started off doing it for fun on the side, but I’ve realized after five months or so that I want to do it full-time and try to make a living out of it.

Original Jurisdiction comes out as both a newsletter and a blog; please feel free to sign up if interested. Right now it’s free, as it has been for the past five months. Next week, I will add paid subscriptions — which is how writers on the Substack platform earn a living — but there will always be lots of free content.

I have greatly enjoyed my two years at Lateral Link, in large part because of my amazing colleagues, and I wouldn’t have wanted to work at any other recruiting firm. I don’t think there’s another legal search firm out there that has such talented recruiters and does such an excellent job of encouraging and incentivizing them to work together as a team.

If you’re interested in working with Lateral Link as either a law firm or a candidate, please feel free to reach out to me. Although I’m finishing up my work here, I’d be happy to connect you with an appropriate colleague.  Thank you, and please do stay in touch!