Law firms' partners are making more money a new survey shows, but gaps in compensation when gender, ethnicity, and equity status are factored in are widening

  • A report by the legal recruiting firm, Major, Lindsey & Africa, analyzed a series of surveys on partner compensation across law firms.
  • Although partners are making more than they did 10 years ago, there are widening disparities when gender, ethnicity, and equity status are factored in.
  • Partners who have made lateral moves also reported 20% to 30% greater earnings than those who remain at the same firm throughout their careers.
  • Business Insider spoke with Jeffrey Lowe, who spearheaded the surveys, and got a first glance at the report.
  • Visit Business Insider's homepage for more stories.

Lawyers are making 38% more than they were 10 years ago, but the disparity between compensations of male and female, white and non-white, and equity and non-equity partners are widening, according to a new report by legal recruiting firm Major, Lindsey & Africa.

The firm's report, published Tuesday, also found that attorneys who made lateral moves earn more than their non-lateral counterparts.

This comes as partner compensation continues to be a hot-button issue in the industry. Firms are increasing pay for equity partners even as they're laying off workers amid the ongoing pandemic. And, Davis Polk recently announced that it's abandoning its strict lockstep system as the battle for top legal talent becomes increasingly competitive.

Average partner compensation has grown 38%, from an average of $640,000 in 2010 to $885,000 in 2018, according to the report, which surveyed thousands of partners at law firms ranked in the Am Law 200, NLJ 350, or Global 100 on the salaries they paid from 2010 to 2018.

The key driver behind this increase is a commensurate 40% rise in originations, which is based on how much revenue is generated by clients that a partner brings to the firm. Survey respondents said that originations were the most important factor in determining partner compensation.

Despite an overall rise in compensation, partners of color see mixed results

However, the increase in pay is not universal when broken down by partners' ethnicity.

While reported average compensation of white, Asian Pacific, and Hispanic partners all rose in the past decade, that of Black partners actually fell from $565,000 in 2010 to $539,000 in 2018 — a 4.5% decrease. By comparison, average compensation for white partners in 2018 was $864,000.

Lowe footnoted this trend with the caveat that it's difficult to draw meaningful statistical conclusions from this data, since there are so few partners of color to begin with. He does think, from a bigger perspective, that there's been a marked improvement in diversity in law firms from 20 or 30 years ago, when firms didn't acknowledge that there was a diversity issue.

Read more: 2 key steps law firms must take to boost diversity — and how being inclusive can help land major clients like Microsoft

The topic of diversity has especially been sparking discussion in recent months as the country undergoes a racial reckoning. Law firms, which are traditionally seen as dominated by white males, are no exception. Despite efforts to increase diversity and inclusion, some firms may not know how to implement meaningful changes.

"What hamstrings them now is that they're not quite sure how to fix it," Lowe said. "Continuing to make sure that everyone's given a seat at the table is really important."

Gender pay disparity may be widening, especially among non-equity female partners, but lateral moves might help

Along similar lines, the report found that while the proportion of partners who identify as female has increased from 15% to 24% in the last eight years, female partners earned an average of 35% less than male partners in 2018 — down 11 percentage points from the gap in 2010.

Average compensation for male partners in 2018 clocked in at $959,000, whereas that for female partners was just $627,000.

Male partners' compensation levels are increasing at a substantially faster rate than female partners', thus leading to this widening gap, per the MLA report.

This difference is only exacerbated when you factor in the gap between how much equity partners make versus non-equity partners.

Equity partners, who own a share of the firm, reported 67% higher average pay than non-equity partners, and their compensation is growing nearly four times faster than that of their non-equity counterparts.

Read more: Davis Polk just abandoned its strict lockstep pay model. 4 recruiters lay out why competitors will have to follow to retain rainmaking lawyers.

"The degree to which the gap between equity and non-equity partners has been widening has been incredible," said Lowe. "It hits home more than ever that if you're going to be doing this, you really want to be an equity partner."

The report also confirmed something that Lowe had only heard anecdotally: that partners who have made a lateral move at some point in their careers consistently earn 20% to 30% more than those partners who have never moved. 

The effect is even more pronounced with female partners, who reported 40% higher median compensation than non-lateral female partners. On top of this, they reported greater satisfaction with their compensation — and overall satisfaction with their life as an attorney — as well.

The aim of surveys, started in 2010, is to identify trends in partner compensation across the industry. "We're firm believers that more data is better data," said Lowe. The firm will collect 2019 data for its 2020 survey later this year. 

"It's something that can help firms "set expectations for their partners and make better decisions going forward," Lowe added.

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