Reed Smith is bracing for the economic impact of Covid-19 by slowing the cash distributions it makes to partners, the firm said in a statement.
The firm said the move was a “precaution” and that it was “performing on plan” through the first three months of the year. It noted that many of its practices are “exceptionally busy.”
“At the same time, we know businesses around the world are bracing for the short-term and potential long-term economic impacts of COVID-19, and we are taking a fiscally conservative yet responsible approach,” a firm representative said in a statement. “Our leadership is taking a cautious approach and has made the decision to slow partner cash distributions in the near term as a precaution. We think this is a prudent choice as we look ahead to uncertainty in global events.”
The firm declined to elaborate on the measures.
Reed Smith had 280 equity partners in 2019 and, on average, they made slightly more than $1.3 million, according to the most recent AmLaw reporting. The Philadelphia-founded firm is among the largest in the world, with nearly $1.25 billion in 2019 revenue and more than 1,600 lawyers, according to AmLaw.
Partner profit draws are among the largest line items on a law firm budget, and slowing cash distributions is a way for law firms to fund other business expenses such as associate and staff salaries. The strategy has been promoted by some law firm consultants, but it can carry the risk of unsettling individual partners who do not agree with a reduced salary in the near-term.
Some law firms have already announced adjustments to pay and personnel amid Covid-19. Womble Bond Dickinson said in a statement Monday that it had furloughed some employees and let a small group of staff go, in addition to implementing pay reductions of 10% or less for remaining members of the group.