MS Legal Search founder weighs in on top firm chairman’s very public pay cut.
Chairman’s $1M Pay Cut Puts Dechert In PR Bind
By Anne Urda
Law360, New York (May 12, 2009)
While a handful of firms have already revealed that partners will be taking a salary hit in 2009, Dechert LLP chairman Barton J. Winokur’s reported $1 million pay cut caught the attention of the legal industry Tuesday — much to the chagrin of the firm itself. A Dechert spokesperson confirmed that chairman Barton J. Winokur had opted to take a percentage pay cut after someone leaked word to the Philadelphia Inquirer of the draw-down, revealed in a closed-door meeting of big-firm leaders in April. The revelation surrounding Winokur’s pay cut was met mostly with praise, as legal blog Above the Law named him partner of the day, while the author of the original Inquirer article opined about how other law firms should follow Winokur’s example. While the praise is nice, the story has proven to be a double-edged sword for the firm as it tries to clarify certain aspects of the pay cut situation while touting the firm’s overall health. Dechert contests the $1 million figure reported, with a spokesperson pointing out that Dechert’s 35 highest draw partners all took a percentage cuts, in addition to the chairman.
The spokesperson also said that the pay cuts were one of several steps the firm had undertaken to bolster its capital given the economic crisis, including prepaying $29 million of its 2009 expenses in 2008. If the firm performs at a strong enough level, the reductions could be restored to previous levels, the spokesperson said.
The representative maintained that Dechert was doing very well despite the economic crisis, pointing out that the firm just opened an office in Moscow days ago. Though Dechert may be dismayed by the revelation regarding the partner pay cuts, it is hardly the only firm to have asked the partners to tighten their belts. DLA Piper has already said that most of its partners in the U.S. would be looking at a pay cut in 2009, which the firm expects to be a down year. The revelation followed less than two weeks after it was reported that Dewey & LeBoeuf LLP had cut compensation for 66 of its partners. “Partner compensation adjustments are not new,” said James Cotterman, a principal at consulting firm Altman Weil Inc. “Firms have made and will continue to make adjustments to partner draws and distributions as they assess current and likely future economic conditions.” That’s not to say, however, that the gesture is devoid of all symbolism, he said. “Many firm leaders, like many business and community leaders, feel it appropriate to demonstrate a sensitivity to their stakeholders’ situations,” Cotterman said. “A compensation adjustment is one means to accomplish that. How a law firm implements and communicates such a measure is really specific to that law firm and their stakeholders.” Winokur’s move appeared noteworthy in part because of its personal nature, a bold acknowledgment from the head of a large law firm of the tough times that had hit others at the firm and beyond. In March, Dechert cut 63 lawyers and 62 individuals in administrative positions, barely a month after letting 19 lawyers go on the ugliest day for the legal industry since the economic downturn began. On Feb. 12, eight major firms, including Dechert, announced a total of 748 layoffs, including 320 lawyers and 428 staff members. “I have been hearing about partners quietly taking pay cuts or missing draws because of the economy — but none as public as Dechert, and probably none as large,” said Elaine Makris Williams, founder and principal of recruiting firm MS Legal Search. But the good will engendered by such a move may not last very long, Williams said. “In theory, it sends a good message to clients, however, it could backfire — since the natural question it raises is ‘how much of a pay cut is this, and how much was he making?'” Williams said.
Indeed, most of the pay cut articles already pointed to a piece in the American Lawyer in which a former Dechert partner speculated that Winokur pulled down somewhere around $8 million in 2007, another number that a spokesperson for the firm rejected.
“The backlash could be that he was making too much to begin with, because he was charging too much to the very clients he is trying to impress or appease,” Williams said. A better move might have been to forgo his salary altogether or take a very modest one akin to what the firms are paying new lawyers to defer their start dates, she said. Though the story may continue to play out in the press, Williams does not expect other firms to rush out and follow Winokur’s lead any time soon. “My sense is that it will be dismissed, and I doubt other firms will feel pressured to do something similar,” she said. “What clients care about most is lower billing rates.”
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