Law Firm Pay Changes
Albert Goodwin, LawFuel contributor
Davis Polk chair, Neil Barr, sees the next 18 months as a key period that will reshape the legal industry landscape with increased lateral hiring and changes to law firm pay models, according to a report in Bloomberg Law.
Lawfuel reported on the lateral recruitment move in law recently and the moves by Davis Polk to ramp up their lateral hiring reflects the increased aggression by firms to adopt the practices.
“While we have not always prioritized the lateral market, this is a tremendous opportunity for us,” Barr told Bloomberg. “So we will be leaning into the market to try and advance our strategic objectives.”
Lateral recruitment moves will intensify competition for talent among the elite law firms. Davis Polk, one of the LawFuel ‘Prestige Law firms’ largest law firms, ranks 20th based on 2023 revenue of more than $2 billion, according to American Lawyer.
Its average equity partner earned $6.2 million last year, eighth most among the 100 largest firms, the AML data shows.
Davis Polk also intends to increase compensation at the higher end of its pay scale for top-performing partners, which is another area we discussed recently involving the ‘black box’ compensation trend among top US and UK law firms.
While the firm has historically promoted most partners internally, Barr says lateral hiring from the external market provides “a tremendous opportunity” to advance the firm’s strategic objectives more rapidly.
Barr expects significant movement of partners between firms over the next 18 months as the legal industry consolidates around a smaller number of elite players.
More firms are getting better at articulating their strategies to attract lateral partners and are taking calculated risks in attracting partners to boost their areas of practice and profile.
After moving away from strict lockstep partner compensation a couple years ago, Davis Polk is now re-evaluating its compensation model. This is another area Lawfuel has reported on as remuneration practices change.
Barr said any changes will preserve the firm’s philosophy of aligning partner interests toward growing the overall pie over the long-term through their contributions.
The lateral hiring shift represents a departure for Davis Polk, which has historically promoted partners from within and made few lateral hires as it experienced little partner attrition to competitors.
But Barr argues leveraging the lateral market has become an obvious strategic imperative as top firms increasingly operate as sophisticated businesses.
