In a major reversal from a recent Big Law trend, Kirkland & Ellis said it will consider giving lawyers equity shares nine years after they leave law school rather than 10, a move that could pile financial pressure on competitors.
Kirkland announced the change in an internal memo sent by the firm’s leadership committee on Wednesday and obtained by Bloomberg Law. A Kirkland spokeswoman confirmed the memo’s authenticity but declined to comment.
“Given the talent of our partnership and the increased responsibilities and experience gained in today’s environment, we believe that consideration for equity a year sooner is appropriate,” the committee said in the memo.
The change at the largest law firm by revenue comes as Kirkland and its rivals intensify their competition for talent amid pandemic-induced attrition and a surge in demand for deal work. Kirkland reported more than $4.8 billion in gross revenue last year, according to data compiled by The American Lawyer.
The move marks a reversal from trends in Big Law that have for years made the path to partner more difficult. Many law firms seek to limit their number of equity shareholders to maximize a crucial industry statistic known as “profits per partner,” which symbolizes a law firm’s financial firepower.
Kirkland is not the first to shorten its partner track in recent years, but the move remains rare. Weil, Gotshal & Manges, another top firm that competes for the most lucrative deal work, in 2018 shortened its partner track by two years in an effort to retain mid-level associates.
Major law firms compete to hire the “best talent” and are compelled to match industry-leading salaries and benefits for their lawyers. While the length of a partnership track hasn’t historically topped the list of competitive benefits, Kirkland’s change could pressure other firms to match the costly move.
‘Terrifying for Other Firms’
Kirkland has a reputation for leading on industry changes. Most recently, it has paid large bonuses to hire rival associates during the work boom. And over the past decade or so it is credited—or discredited by rivals—for heralding in a free agent era among Big Law firms after it began paying large salaries to lure star partners from other firms.
“This is a bit terrifying for other firms because nobody knows what the future looks like, which makes Kirkland’s decision even bolder,” said Kay Hoppe, a Chicago-based legal recruiter. “It takes a firm like Kirkland that is fearless to absolutely reverse course on the industry’s lengthening partner track in order to protect its reputation as having the best talent.”
After two years of blowout financial success, Big Law is better able to afford more partners sharing a split of the spoils—and Kirkland is more well-positioned than others. The firm’s average equity partner earned $6.2 million last year, according to data from The American Lawyer. That was the third highest among all firms and up nearly 20% from 2019.
The American Lawyer first reported the partnership track change.
Kirkland, like many other firms, has a dual partnership. It promotes a large number of associates to an income-based partnership after six years. This year, that group set a record at 151 lawyers. Those attorneys were previously considered for equity as soon as four years later—now three.
Kirkland had 476 share partners and 682 income partners last year, according to AmLaw data.
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Profits are expected to surge at most Big Law firms again this year. Kirkland has remained one of the busiest shops, advising on the major corporate transactions driving the industry’s growth.
Handing out equity shares to more lawyers could also be a retention strategy in an environment where Big Law attorneys are working longer hours than normal, stoking fears of burnout and attrition.
Historically, most of Kirkland’s income partners have departed the firm before “making share partner,” as the firm colloquially refers to the life-changing event.
Kirkland has made other moves this year in order to hire and retain lawyers, including opening offices in cities, including Salt Lake City and Austin, Texas, where many Big Law firms have not historically had a local presence. Those geographic expansions were aimed at hiring from a talent pool in increasingly popular cities.
Bruce MacEwen, president of law firm consultancy Adam Smith Esq., said Kirkland’s move may be aimed at softening the relationship between law firms and their lawyers during a year that has demanded tremendous time commitments from attorneys. It is more important than ever, he said, that law firms express to lawyers what they stand for as an organization.
“If they are trying to say, ‘We hear you, and we are prepared to renegotiate the terms of this career track and work-life balance,’ that could be very powerful,” MacEwen said. “And more importantly, at least as of today, it’s a distinction.”