Skadden Mulls Non-Equity Tier as Partner Pay Pressure Mounts

Skadden is considering adding a tier of salaried “partners” at the Wall Street law firm, following similar moves by several of its rivals.

The firm’s partners are discussing adding a non-equity level, according to two sources familiar with the talks. Those lawyers would largely be paid by salary, rather than getting a cut of the firm’s profits.

Firms are using non-equity partner roles to keep talent and free up profits for rainmakers as the price tag on top lawyers soars. Skadden, Arps, Slate, Meagher & Flom is among few remaining holdouts after prominent firms like Paul Weiss, Cleary Gottlieb, and WilmerHale established two-tier partnerships last year.

A total of 13 firms among the 100 largest in the country have single-tier partnerships in which all partners earn equity shares, according to data released last year by The American Lawyer. The largest firms could have more total non-equity partners than those sharing in profits by the end of this year.

Skadden has recently seen some lawyers leave for partner roles at competitors with two-tier systems. James Talbot, who served as counsel at Skadden for nearly three decades, became a partner at Simpson Thacher late last year. Matthew Lisagar landed a partner role at Kirkland & Ellis after 15 years as a Skadden associate.

Discussions of adding non-equity partners follow the firm’s loss of a group of litigation partners in Philadelphia, according to a person briefed on the moves.

Financial News first reported the discussions. Skadden did not immediately return a request for comment.