Morrison Cohen Leaders Tout Revised Pay for Firm Originators

The leaders of the midsize Manhattan firm Morrison Cohen are defending changes to the law firm’s pay system following a wave of recent partner departures.

“When change is made to a system that has been pretty much static for most of its history, it has the inevitable feel of disruptiveness to people that are there,” Y. David Scharf, the firm’s co-managing partner, said in an interview. “Change can make people uncomfortable.”

The firm has moved away from an “eat what you kill” pay system, according to Scharf and Steve Cooperman, who is also co-managing partner. It has trimmed valuable “origination credit” for rainmakers, shifting some pay to other lawyers and reinvesting in the firm’s infrastructure, they said.

The firm is bucking the trend of many Big Law firms, which have been adjusting pay to reward originators for their work bringing in new firm clients and business.

Nine Morrison Cohen partners decamped for rival Loeb & Loeb in the last two months. The departures include Stephen Budow, a founding partner and the former leader of Morrison Cohen’s corporate department. At least two other partners have exited for other firms this year.

“Might there be some more fallout? I couldn’t rule it out,” Cooperman said. “Because a lot of these conversations happen under the cover of night.”

Cooperman and Scharf took the reins at the now 120-lawyer firm in early 2020. They succeeded David Scherl, who spent 17 years at the helm.

The pair said they recognized that the firm needed to change its compensation priorities before they took the top roles. Legal headhunters later told them the percentages the firm paid to “originators” who bring in new business, were on the high end for the market.

They’ve reduced those percentages in some cases by 3% to 5%, moving the revenue to other lawyers.

Current considerations for compensation include “financial performance, hours, fiscal responsibility, maintaining and growing existing client relationships as well as developing new ones, hard work,” and demonstrating firm values, Cooperman said.

The firm is also focusing on “reinvesting” in the business through better “infrastructure.” Its revitalized C-suite includes a new chief operating officer and a diversity, equity and inclusion director, both brought on in 2023, among other hires.

Cooperman says Morrison Cohen’s “significant originators” are “firmly behind what we’re doing.”

The firm reported $122 million in gross revenue last year, up 10% from 2022. Profits per partner ticked up slightly to more than $1 million, according to data from The American Lawyer. The firm also boosted collections by 20% over the same time.

None of the nine partners who left Morrison for Loeb & Loeb, as well as one each who left the firm for Baker & Hostetler and Tarter Krinsky & Drogin, could be reached for comment.

Managing Partner Pay

Most firms of Morrison’s size and larger struggle with how to compensate their partners, especially their rainmakers, said Dan Binstock, a partner with the legal search firm Garrison & Sission.

A key for firms contemplating pay changes is balancing rainmaker compensation with other demands, like firm values and culture, retention needs and client relationships, Binstock said.

“If you speak to ten managing partners, eight or nine are wrestling with their compensation structures,” said Binstock. “Striking the right balance is akin to three-dimensional chess.”

‘Looking for Growth’

The changes will put more emphasis on collaboration among lawyers, rather than solely valuing origination, Cooperman said.

The firm’s profits and partners’ books of business “will increase as we embrace each other to support each other, to collaborate, to grow business relationships that are within the firm,” said Scharf. “It’s only a pay reduction if everything remains static. We’re not looking for static, we’re looking for growth.”

The firm’s “more holistic approach” rewards “skilled lawyers” who are not specialists in bringing in new business, but critical to keeping it, Cooperman said. “Once that client is in the door, they’re gonna make that client love them and love the firm.”