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Cravath, Swaine & Moore has quietly created a salaried partner tier, making it the latest in a series of Wall Street law firms to revamp pay schemes in response to new competitive forces.
The firm “recently established the salary partner role,” Faiza Saeed, Cravath’s presiding partner, said Tuesday in an internal memo viewed by Bloomberg Law. “These changes have enabled the Firm to retain and promote extraordinary people at all levels so their experience and expertise can continue to benefit our clients.”
A Cravath representative declined to comment.
Non-equity partner tiers, in which lawyers are paid annual salaries rather than getting a share of profits, were once scarce among Wall Street’s elite firms. The classification is now becoming more common as a tool to help firms retain talent and free up more cash for top partners.
The move “is a recognition that the century-old bimodal career structure of law firms has come to the end of its useful life,” said Bruce MacEwen, a law firm consultant. “The old structure is showing its age.”
Cravath’s change comes as peer Paul, Weiss, Rifkind, Wharton & Garrison reportedly is considering adopting a non-equity partner tier in 2024.
Cravath created the non-equity partner tier in late 2021, according to three sources familiar with the situation who spoke on condition of anonymity. The 204-year-old firm at the same time made another major change, loosening its lockstep pay model in which partners were compensated solely based on seniority.
The firm currently has between five and 10 partners within the salary tier, the sources said.
Kirkland & Ellis, the world’s most profitable firm, has one of the largest non-equity partner tiers. Simpson Thacher & Bartlett introduced a non-equity partner tier in 2019 as did Willkie Farr & Gallagher. Davis Polk & Wardwell; Cleary Gottlieb Steen & Hamilton; Debevoise & Plimpton and Wachtell Lipton Rosen & Katz remain single-tiered partnerships.
Cravath over two centuries has built its brand as a top flight deals firm, recently advising the likes of Amazon, Walt Disney Co., and Johnson & Johnson. Its relatively small partnership—consisting of 97 lawyers—raked in nearly $4.7 million apiece in average profits last year.
The firm, which rarely sees partners decamp for rivals has sustained some notable exits in recent years. Dealmaker Damien Zoubek joined Freshfields Bruckhaus Deringer in 2021 as co-head of its M&A practice, while M&A partner Andrew Elken joined Latham & Watkins earlier this year. Cravath also saw a trio of partners head to Davis Polk & Wardwell, including David Portilla, the head of its bank regulatory practice.
For its part, Cravath opened up an office in Washington earlier this year, hiring notable government officials like former acting attorney general Jeffrey Rosen. It also launched an English law offering in the UK with hires from Shearman & Sterling and Latham & Watkins.
Saeed in her Tuesday memo to the firm noted that lawyers in salary partner and of counsel positions can continue to be considered for equity partnership.
“That fluidity is both more consistent with the current market for legal talent and certainly benefits our people and our clients,” she said.
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