Partner Pay Arms Race: Are Law Firms Selling Out Their Values?

Law Firms Struggling With Partner Pay Segmentation

There is an intensifying debate coursing through the halls of elite law firms worldwide—a debate centered on how to remunerate high-performing partners at unprecedented levels without sacrificing the cohesion and morale of the partnership as a whole. This tension has long existed in top-ranked Legal 500 firms, AmLaw 100 giants, and Magic Circle stalwarts, but it has become much more pronounced in recent years. Observing this firsthand in the course of overseeing significant partner moves across multiple jurisdictions, I have seen the challenges law firms face when designing compensation structures that can accommodate partners whose books of business have skyrocketed, sometimes doubling from one year to the next. More than ever, the gap between top earners and their colleagues is widening, forcing law firm leadership to grapple with questions not only of fair remuneration but also of sustainability, longevity, and partnership values.

The Growing Divide in Partner Compensation

The legal market has become intensely competitive. As corporate transactions become larger and more complex, and as litigation, regulatory, and restructuring practices become more lucrative, top rainmakers have found themselves in an almost unimaginable position: their books of business are growing at record paces, sometimes reaching 60 or even 120 million dollars. Meanwhile, other partners, no matter how dedicated or technically gifted, struggle to match these astronomical numbers. The result is a stark pay segmentation that sits uneasily with the traditional notion of an equitable law firm partnership.

At the heart of this tension is the question of what the “top” should be. Many law firms historically used compensation systems that recognized seniority, loyalty, and a rough measure of productivity. However, when a small subset of partners starts generating revenue that dwarfs the contributions of colleagues, the old frameworks begin to buckle under the strain. Simply awarding the top performer a 20 to 30 percent pay bump—once considered generous—no longer suffices when the gap between that partner’s revenue generation and the average partner’s revenue might be in the tens of millions of dollars. In this context, firms are questioning how far they should (or must) go to keep these exceptional revenue generators happy. “What should the top be?” becomes more than a rhetorical inquiry: it becomes an existential dilemma about whether the firm can or should preserve traditional values of partnership or whether it must embrace a more corporate, performance-driven approach.

This debate is not confined to any single region. It plays out in the top tier of the London market among Magic Circle firms, throughout the elite and mid-tier U.S. market as tracked by the AmLaw 100, and increasingly in powerhouse Asia-Pacific firms. When a partner’s book of business grows from $60 million to $120 million in a single year, the firm’s leadership faces intense pressure to ensure that partner feels justly compensated—or risk losing him or her to a competitor offering an even more eye-popping compensation package.

Challenges for Law Firms in Evolving Compensation Systems

Law firms have typically approached partner compensation through a variety of systems, ranging from the pure lockstep structures that were once a hallmark of Cravath, Cleary Gottlieb, and other historically prestigious firms, to more flexible “eat-what-you-kill” models found in certain U.S. firms emphasizing individual origination. In the pure lockstep context, seniority and firm tenure largely determine compensation, creating a stable environment and preserving a collaborative culture. By contrast, in the eat-what-you-kill model, high performers are rewarded with a direct link between the revenue they generate and their pay.

However, law firm leaders are acknowledging that neither extreme remains perfectly workable in a climate of skyrocketing partner billings and a fierce lateral recruiting market. Many storied institutions have modified their lockstep approach, creating a hybrid model that offers a premium to star performers while trying to preserve the core cultural tenets of lockstep (the notion that partners rise together and share financial success). On the other side, even the more flexible systems have had to find ways to protect mid-performing and rising partners so that the firm’s pipeline of future rainmakers remains robust. Balancing these tensions often involves complicated committee structures, compensation review boards, and layers of analysis that look at not only immediate financial metrics but also intangible contributions like mentoring, firm management, and professional development.

That said, the sheer magnitude of top performers’ revenue gains in recent years—some doubling their books in a year—pushes the boundaries of these systems. Partners expect their compensation to mirror their contribution to the firm’s overall profitability, and a 20 or 30 percent annual raise might seem paltry next to a 100 percent jump in billings. Yet, awarding such an individual a vastly disproportionate share of the firm’s profit could alienate other partners who believe that they, too, have contributed to the success in more indirect ways (supporting deals, handling legal complexities, or helping manage client relationships). Law firms consequently find themselves in a quandary: they need to stay competitive, but if they overtly favor their top rainmakers, they risk fracturing the partnership.

The Impact on Lower-Performing Partners

One facet of this issue that rarely receives enough attention is the growing sense of inequity among those partners who may not have experienced a meteoric rise in their client billings. Of course, “lower-performing” can be a misleading term when applied to attorneys who might still be generating millions of dollars in billings annually. Yet the internal dynamic is unavoidable: if the gap in compensation between the most successful partner and the rest of the partnership widens too significantly, it becomes difficult to maintain a team-focused atmosphere.

Many law firm managing partners have confided—off the record, of course—that they face a potential morale crisis when the rainmakers are rewarded so lavishly that other partners feel marginalized. While high performers insist they deserve a direct correlation between pay and revenue, some of the more moderate performers worry that the firm will lose its core identity if compensation becomes too individualized. The tension extends to considerations about client relationships: top billers rely on a broader team of partners for referrals and complementary expertise in litigation, intellectual property, tax, or regulatory matters. In turn, those practice groups demand acknowledgment that the firm’s success is not solely attributable to any single rainmaker. This dynamic can breed frustration on both sides if compensation becomes overly concentrated at the top.

Shifting Compensation Structures in Global Firms

In response, firms of all stripes—whether Magic Circle firms in London, global Swiss vereins with operations spanning Europe, Asia, and the Americas, or U.S.-based behemoths in the AmLaw 100—are reevaluating their compensation structures. Some have moved away from pure lockstep, adopting a more performance-based banding system that rewards top rainmakers with higher multipliers. Others have tried to maintain a nominal lockstep while instituting discretionary bonuses that can be significant. In some instances, these changes have been publicly discussed. Cravath, for example, was once almost synonymous with lockstep, but it, too, has allowed more latitude in partner compensation. Cleary Gottlieb has likewise acknowledged that some modest departure from the lockstep model may be necessary to remain competitive with firms that aggressively poach star partners.

These modifications come with complexities. A firm might give lip service to the concept that “we remain essentially lockstep,” while quietly awarding top performers significantly larger shares. This can result in confusion, if not outright resentment, among the broader partnership. On the other end of the spectrum, a complete abandonment of lockstep can lead to a Darwinian environment that undermines the firm’s culture of shared values. The most successful firms, in my experience, recognize that even top rainmakers rely on the infrastructure, brand, and multi-practice support of the firm. They do not want to alienate the practice areas that feed their deals or controversies. The challenge, therefore, is to design a system that appropriately rewards top-line growth but also makes the rest of the partnership feel that the rising tide lifts all boats.

Equity Distribution and Its Pitfalls

An especially sensitive aspect of these compensation debates is the allocation of equity. Partners, of course, often earn in two distinct ways: through their equity shares (the number of points or units in the firm) and the value attributed to each share. When a partner’s business balloons by 100% or more, it is natural for that partner to expect a larger piece of the equity pie. Yet firms are increasingly hesitant to grant additional shares outright, for fear of overly concentrating ownership or tying the firm’s hands if performance dips or if other partners also rise in revenue generation.

Consequently, many firms have taken to telling partners that their current shares are simply “worth more”—that is, the firm as a whole is generating more profit, so the same number of shares will yield a higher payout. While this approach might placate some, it can breed frustration in those who believe their outsized contribution justifies an even bigger stake in the firm’s equity. In the course of handling partner moves, I have heard repeated stories of capable, high-billing partners who become disenchanted when their equity share remains static despite doubling their book of business. Many interpret the refusal to grant more shares as a sign that their firm undervalues their contribution, even if the nominal payout still increases in absolute dollars.

Adding another layer to the problem, law firm leaders need to consider the future. If they lavish shares on a small group of star performers today, what happens if next year’s star performers demand the same or better? The risk is that the firm’s equity becomes too dispersed and, over time, devalues individual stakes. Some firms use de-equitization strategies or slower progression for new equity partners to guard against that possibility, but such tactics come at a potential cost: restricting equity promotions too aggressively could send a signal to the next generation of talent that upward mobility is blocked. Conversely, awarding equity too freely can dilute the profits that partners receive, creating discontent among the established ranks. It is a perpetual balancing act, and the friction is only becoming more intense as top performers continue to shatter previous billing benchmarks.

The Rise in Partner Mobility

One of the stark realities of modern private practice is that partner mobility has never been higher. Partners who feel shortchanged or believe their firm’s compensation system fails to recognize their individual excellence have no shortage of alternative suitors—top U.S. firms courting them for cross-border practice expansions, Magic Circle firms seeking new marquee names, and globally integrated Swiss vereins looking to strengthen an industry vertical or regional footprint. Having been intimately involved in many significant lateral moves, I can attest that frustrations over perceived equity stagnation are among the top five reasons partners become receptive to such discussions. Their logic is straightforward: if I can go to a competitor that will grant me the equity stake I feel I deserve, along with a potentially eye-popping guaranteed draw for the first few years, why should I remain where I am?

Firm leaders, for their part, are painfully aware of this risk. They often prioritize retaining top-tier rainmakers above all else because losing them can have profound ripple effects. A departing star might take not only their multi-million-dollar book of business but also key associates, counsel, and support staff—sometimes even marquee clients who view the partner as indispensable to the relationship. The ability to bring a major practice group along in a move significantly shifts the balance of power. Therefore, law firms are employing various measures to maintain equilibrium within the partnership while still giving star partners enough reason to stay. This can include offering limited-duration “kickers” or bonuses rather than permanent equity increases, or structuring compensation reviews more frequently, so that a sudden surge in revenue generation can be recognized promptly.

The Move Toward Shorter Compensation Review Periods

One tangible way firms are adapting to this environment is by shortening the horizon for partner compensation reviews. Instead of waiting for the usual annual or bi-annual review, some firms are monitoring performance more closely—quarterly or semi-annually—and adjusting certain components of partner pay accordingly. This approach can be beneficial in that it allows rapid recognition of high performers, alleviating the frustration that might otherwise mount over a year or more if a partner feels their contributions go unacknowledged.

Yet this strategy also has pitfalls. A shorter review cycle can breed a culture of perpetual competition, where partners feel they must constantly jockey for recognition and credit. It can deprive the partnership of the long-term perspective that fosters collaboration and continuity. Moreover, it can lead to over-distribution of profits if firms reward surging partners too quickly, only to find that overall profits slump in the next quarter due to macroeconomic factors, a downturn in deal activity, or other market disruptions. Precisely for these reasons, many law firms, while intrigued by a shorter review period, remain cautious about making radical changes. They see the reputational risks inherent in over-promising and under-delivering—a scenario that can set the stage for renewed discontent the following year.

Law Firm Politics and Culture Under Pressure

Beneath all these structural and economic considerations lies a deeper tension about culture and politics within law firms. Partnerships often pride themselves on being more than mere aggregations of lawyers. They typically like to see themselves as cohesive professional communities upholding common standards of excellence, ethics, and collegiality. When compensation segmentation grows, it can undermine this sense of unity. The partners who are “left behind”—even though, by any objective standard, they might still be billing impressively—begin to question whether they remain equal in the eyes of the firm. Meanwhile, the star performers, conscious of their stature, can become increasingly protective of their own interests. This polarization can become self-reinforcing, making it harder for firm leadership to implement the sort of nuanced compensation policies required to address the situation effectively.

In the Magic Circle context, where certain ideals of partnership have historically been highly prized, the move away from pure lockstep has been somewhat controversial. Similar debates rage in top-tier U.S. firms, especially among those that are not purely “eat-what-you-kill” but had prided themselves on balanced compensation systems. Cross-border firms that must reconcile partners working under different legal systems and market conditions—some in high-fee jurisdictions, others in more regulated or less lucrative regions—face additional complexities. A partner in a robust U.S. private equity practice might bring in $100 million in fees, while a partner in a regulatory practice in Europe might handle less lucrative but strategically important work for the same client. Balancing these vastly different revenue outcomes while maintaining an atmosphere of professional respect and shared identity is an ongoing challenge.

No Easy Solutions—and the Road Ahead

Where does this leave law firms, and what are the likely repercussions as we head further into 2025 and beyond? In my experience of advising partners on high-level moves, there is no single perfect solution. Slowing down equity promotions might reduce the risk of dilution, but it can also create disillusionment among deserving up-and-comers. Adopting a purely performance-driven model might keep top rainmakers from jumping ship in the short term, but it can erode the partnership fabric that made the firm successful in the first place. Telling partners that their existing shares are worth more can placate them for a time, but if they see peers at rival firms enjoying increased shares plus higher valuations, the dissatisfaction will eventually bubble over.

What seems certain is that partner pay segmentation will remain a major factor in both retention and lateral movement across the global legal market. Law firms that mishandle this issue face the possibility of losing top talent or fracturing their partnership into feuding factions. Those that succeed will likely be the ones that demonstrate agility and creativity—recognizing that, yes, star partners need to be compensated at levels proportionate to their contribution, but also remembering that these stars still rely on the broader platform and support of a well-functioning partnership. In other words, the top partners might deserve the largest piece of the pie, but if they take such a large slice that everyone else leaves the table, the overall enterprise could suffer.

Firms may also need to brace for more frequent partner moves. As the frustrations over equity stagnation or insufficient pay escalations continue, I expect more high-billing partners to discreetly explore their options in the lateral market. And there will be no shortage of firms willing to make a significant investment in securing a recognized rainmaker who can transform a practice group overnight. This dynamic will continue to drive the upward spiral of partner compensation at the high end—placing ever more pressure on firms to figure out how to fund these lavish packages while preserving morale among the rest of the partnership.

A Call to Discreet Dialogue

In this high-stakes environment, senior partners and rising stars alike would do well to keep an open mind about their long-term trajectory. Even those who are happy and loyal to their current firms should recognize that the market is changing rapidly and that opportunities to leverage or enhance their positioning might come unexpectedly. I have seen too many partners stay in situations where their contributions are systematically undervalued because they assumed that moving was too complicated or risky. Yet, after a strategic conversation about the market, these same partners often realize that they have more leverage than they thought—either to negotiate for better terms internally or to find a new platform that acknowledges their worth.

Given the delicate nature of these discussions and the importance of discretion, partners should feel comfortable reaching out privately for a confidential conversation about the landscape. Exploring market possibilities does not necessarily mean you intend to leave your firm; sometimes, simply knowing your true market value can inform more productive internal discussions. Likewise, for law firm leaders reading this, understanding the market forces behind partner compensation is crucial to retaining your best talent and charting a path that maintains both profitability and partnership stability.

For those who would like to continue the conversation—and for those who are merely curious about how their compensation metrics stack up against peers in the Legal 500, AmLaw 100, or Magic Circle universe—I invite you to connect with me discreetly via LinkedIn DM. Even if you are entirely satisfied with your current firm, there is strategic value in staying informed about the broader market’s dynamics and ensuring that your compensation remains competitive and reflective of your contributions.

If you found this piece insightful, please feel free to comment on and share it with your colleagues who might benefit from these observations. The legal market is in a state of continual evolution, and knowledge is one of the most powerful assets you can possess in determining your future. Whether you stay put or consider a move, being aware of the growing pay segmentation is critical to protecting your interests and optimizing your career trajectory. In times like these, a discreet dialogue can be the difference between feeling locked into a static system and thriving in an environment that truly values and rewards your achievements.