Lawyer salary

Gibson Dunn Raises Partner’s Compensation Cap But Doubts Simmering

After revamping its compensation system to allow top performers to earn more money, Gibson, Dunn & Crutcher has seen a number of significant partner exits in recent months, with several former partners raising concerns about how the changes have been communicated. But executives say the revamped model has already helped him attract ‘stellar’ full-back talent.

The company, beginning earlier this year, moved its compensation package from a 5.75:1 pay ratio for associates to an 8:1 ratio, according to sources within Gibson Dunn. This change has allowed top performers to approach $13 million a year, according to several recruiters and a former partner.

The company has also split its existing partner shares into smaller units, a move that allows companies to respond to increased profits by allowing for more progressive distinctions in compensation.

Sources within Gibson Dunn said the partner award criteria, which takes into account collaboration, teamwork, mentoring, recruiting, volunteer work and activity dedicated to increasing diversity, in addition to financial parameters, remained unchanged in the new system. And unlike a recent change at Cravath, Swaine & Moore, the size of the bonus pool at Gibson Dunn, which includes no more than 5% of company profits in any given year, remains unchanged, according to sources. sources.

“Our central goal was to ensure that our compensation structure is competitive in today’s market, helping us retain great partners while attracting ambitious talent who sees a long trail at Gibson Dunn,” the partner said. director Barbara Becker in an email. “It was critical to me that any change remained consistent with our values, served the company’s long-term strategic goals, and supported our culture of collaboration.”

Gibson Dunn had not revamped its pay system since 1996, which meant that, given wider transformations in the legal industry, changes were expected following the departure of former managing partner Ken Doran after two decades in May 2021 Doran was replaced on the helm by Becker, and the firm subsequently appointed Washington, DC, litigation attorney Joshua Lipshutz as its first chief operating officer.

Under new leadership, the company’s 22-member executive committee split into several strategy-focused work streams, including one devoted to managing the competitive landscape. This led to a six-month review of the compensation system, informed by input from partners and third-party consulting firms, as well as market data and benchmarks from peer companies and conversations with peers who had provided insights. changes to compensation, according to sources at the Solidifier.

“We proactively communicated these changes through a detailed memo outlining the Executive Committee’s thought process and changes. We also participated in individual and group partner meetings to explain the changes and rationale,” Becker said in an email.

Nonetheless, several former partners and recruiters said there was dissatisfaction with the changes and how they were passed on to the partnership.

“There are a number of people who felt the way it was sent was not very well done,” said a recruiter who requested anonymity to preserve existing relationships with the company. “It could have been done in a much more collaborative way.”

Several partners who left the firm earlier this year and asked to remain anonymous shared similar concerns, with one calling it a “rushed process”.

“My feeling is that he came out of nowhere,” the former partner said. “It was not really communicated that this was going to happen.”

And several recruiters noted that even partners who served to individually benefit from higher pay from the new system were frustrated with the impact it was likely to have on company culture, citing team leaders who expressed concern that specialists in key support roles would see their compensation reduced.

“There are going to be winners and losers,” the recruiter said. “But even the winners think ‘my people need to be protected’.”

goodbye and hello

Gibson Dunn’s financial performance remained on solid footing amid the leadership transition, with revenue up 14.8% in 2021 and earnings per equity partner up 7.6% to 4, $4 million. Staffing also grew by 115 lawyers last year, with the firm increasing the number of partners by 20. And the firm also took one of the boldest stances on remote working in Big Law, avoiding a fixed level of office presence and allowing lawyers to work remotely “when appropriate”.

Nonetheless, a number of big names have left the company so far in 2022. Most recently, former co-chairman of global M&A and chairman of shareholder advocacy Eduardo Gallardo left to serve as co-chairman of the M&A practice of Paul Hastings in New York. . Earlier in June, William Sorabella, M&A partner and two-time American Lawyer of the Year, moved to Cooley in New York.

In Washington, DC, constitutional and appellate law practice co-lead Mark Perry, a 27-year veteran, moved to Weil, Gotshal & Manges in May, joining former Gibson Dunn litigants Andrew Tulumello and Chantale Fiebig, who joined the firm in June 2021. Like Perry, Tulumello also had more than two decades of experience with the firm. Also in May, trade secrets lawyer Josh Lerner left for Wilmer Cutler Pickering Hale and Dorr in San Francisco.

But Gibson Dunn has also been active on the hiring front. In recent months, he has brought in securities attorney Jessie Valenzuela of Cooley in Palo Alto, longtime Cahill Gordon & Reindel capital markets attorney Doug Horowitz as an associate in New York, and former Willkie Farr & Gallagher private equity partners Mike Piazza and Jesse Myers. Houston in recent months after the notable addition of a private equity team in London and several Proskauer employment litigators. Key hires in 2021 included former Yetter Coleman litigator Collin Cox in Houston and antitrust partner Stephen Weissman of Baker Botts.

On Monday, he announced the hiring of former Allen & Overy financial partner Jin Hee Kim in New York, followed on Tuesday by two senior technology lawyers, including a partner, from Milbank’s London office.

Go in the right direction

Firm leaders say the quality of these new hires and the pace at which they have been added proves the pay change has been a success.

“Since the changes, Gibson Dunn has experienced one of the fastest periods of growth in our history. Our new compensation system reinforces our culture of excellence and rewards exceptional work, collaboration and many other contributions that are characteristics of our partnership,” Becker said in an email. “And, the changes help us nurture the next generation of leaders, retain our extraordinary talent, and attract a stellar and significant group of new fullbacks this year, and others are on the way.”

But recent departures, as well as rumblings of displeasure from former partners, demonstrate that tweaking an entrenched compensation system can be a difficult process, even when management feels it is successfully communicating the goals and substance of the changes.

A recent “Law Firm Culture” survey by Major, Lindsey & Africa found that a lack of transparency around compensation decisions is one of 10 traits that inspire negative feelings about his firm, despite being clearly lagging behind trait number 1: the spirit of profit.

“Compensation and transparency around this is important,” said survey author Ronald Wood. “Rising generations, Gen X and Millennials, are really pushing for a lot of things that my generation considered ambitious accommodations.”

And several recruiters have noted that communication has improved since Becker took over. Alisa Levin, director of Greene-Levin-Snyder in New York, noted a dramatic transformation between Doran’s tenure and new management. (She revealed that Lipshutz is her stepdaughter’s brother.)

“Things are much more transparent and inclusive,” she said. “Stylistically, Barbara is very different from Ken.” Levin also described a new approach to side hires which she described as “faster, more responsive and more nimble.”

But another recruiter, who did not want to be named, said Gibson Dunn still had work to do to revamp its broader recruiting strategy, noting efforts to revamp compensation were an incomplete solution. “They don’t know how to recruit like other companies do,” the recruiter said, noting that historically leaders and top partners have been taken out of the process.

But the recruiter conceded that the firm was moving in the right direction. “Barbara, if anything, tries to do things differently, and the culture changes,” the recruiter said.