MORE than 30 partners at one of the US’s biggest law firms have agreed to take pay cuts as the global financial crisis worsens.
International law firm, Dechert, has confirmed that 36 of its highest-paid partners at the Philadelphia-based office have agreed to take a cut in salaries, the AM Law Daily reports.
The news follows a Philadelphia Inquirer report that firm’s chairman, Barton Winokur, would take a $1 million pay cut.
Winokur disclosed the self-imposed pay cut, actually a reduction in his draw from firm profits in late April. In 2007 The American Lawyer reported that the firm's highest-paid partners, Winokur included, had earned nearly $8m the year before, while the firm’s per-partner profits average more than $2m.
In recent months Dechert has taken a number of cost-cutting steps to safeguard itself against further market mayhem.
Winokur declined to comment to media about the pay cut, but a firm spokeswoman confirmed that Winokur, along with 36 other Dechert partners, were taking pay cuts. The current partner pay cuts are based on a percentage of each partner's annual draw, the spokeswoman said, declining to detail those percentages. Depending on the firm's performance over the next few months, partners could recoup that money in bonuses at the end of this year.
Dechert announced a fifth round of layoffs in March, eliminating 125 attorneys and staff members worldwide.
According to Am Law 100 financial data, revenues for the firm fell two per cent last year to $816m and profits per equity partner dropped 9 percent from $2.35m in 2007 to $2.14m in 2008.
In 2006 Dechert's revenues grew faster than all but a few firms that scored big contingency fees or had a merger. Profits per partner hit $1.99m, just a tick below the top Wall Street players and the firm showed above-average growth rates in revenue per lawyer and value per lawyer.
Dechert's formula for success has been to raise rates aggressively, expand head count while tightening up the equity partnership, focus on a few core practice areas, and grow the ranks in London, where the firm has 121 lawyers, and New York, home to 223 more.
Partners credit Winokur, 69, for much of the firm’s growth. Winokur helped sell partners on a five-year plan to mold the firm into a more profitable one in 2001 and has worked to keep the equity partners focused on those goals.
However, the global financial crisis was not in that plan and in the past year the number of equity partners has fallen from 163 to 152 last year, with the total number of lawyers employed by Dechert coming down to slightly under 900.
Addressing the changing economic conditions has also seen the firm prepay about $29m in expenses, such as rent for office space, so far this year. However, unlike other firms, Dechert carries no debt and in a sign of optimism recently expanded its operations to Moscow, opening a new office there.