May 9, 2006
Law Firm Managing Partner Compensation
A law firm that fills its managing partner position as a right of passage or as a place to park a mediocre partner does a disservice to all partners.
It takes effective management for long-term success. Without effective management, a law firm can only be accidentally successful for some period of time. When something goes wrong (and eventually it always does), the consequences for the poorly managed firms are likely to be fatal. Given the fact that every partner’s income and personal wealth is at risk, managing partners should be selected for their executive skills, and their compensation should reflect the value of the job.
Richard Gray addresses the issue of managing partner compensation in the March/April issue of Law Firm Inc. Gray states that, “It goes without saying that the managing partner's compensation should bear a reasonable relationship to the individual's historic compensation level–and, in all likelihood, should be somewhat higher. No one should take a pay cut to become a managing partner.”
Gray emphasizes that while the managing partner should be among the highest paid partners, he/she should not be the highest. “In accounting, investment banking, and even professional sports, the chief executive is paid well, but the highest pay is reserved for the ‘producers’. Law firms should follow this model, too.”
Personally, I would modify Gray’s statement that “…the highest pay is reserved for the producers” to read, “…the highest pay is reserved for the firm’s star producers.”
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Filed under Compensation by Tom Collins