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Survey of American Lawyers at Major Law Firms: Opinion of Shareholder Compensation Models

  • ID: 3243387
  • March 2015
  • Region: United States
  • 58 Pages
  • Primary Research Group
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This study presents the results of a survey of shareholders at more than 70 major American law firms. The study helps its readers to answer questions such as: how happy are shareholders with the current methods of distributing compensation to shareholders? What percentage is distributed in the form of salaries? In bonuses? How many firms have reserve funds and what percentage of total revenues after overhead do these funds account for?

How many firms use a secret ballot for compensation issues? What do partners feel should be changed about the current compensation system? How much does approval of the current system vary by gender, age, field of legal specialization, size of law firm and other factors? How do firms oversee compensation committees? What are the penalties for arrears in collections or tardy submission of time sheets?
Just a few of the study’s many findings are that:

- The younger the shareholder, the more likely they were to consider their law firm’s partner compensation scheme to be opaque and subjective.

- Lawyers in real estate law were much more likely than other lawyers to consider their firm’s partner compensation scheme to be clear and transparent.

- For the largest firms, those with more than 200 lawyers, 56.25% of partners fixed their percentage shares at the beginning of the year and only 10.42% determined them at the end of the year, a ratio of more than 5:1.

- For firms with from 25-49 lawyers this ratio was roughly 1:1.

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The Questionnaire
Law Firms Of The Survey Participants
Survey Methodology & Sample Characteristics
Summary Of Main Findings

1. Is Your Firm’s Compensation Scheme for Shareholders Fair?

2. Should the Firm’s Shareholder Compensation Scheme be Changed?

3. What Exactly Should be Changed about the Firm’s Compensation Scheme?

4. How Transparent is the Firm’s Shareholder Compensation Scheme?

5. What Percentage of Revenue Beyond Overhead Expenses is Distributed to Partners in the Form of Salary?

6. What Percentage of Revenue Beyond Overhead Expenses is Distributed to Partners in the Form of Bonuses?

7. How Many Key Players Determine the Compensation Scheme at Your Firm?

8. Does the Firm have a Reserve that is excluded from Revenue Distributions to Shareholders and Allocated under a Different Set of Criteria?

9. Percentage of Total Revenues Distributed to Shareholders Accounted for by Distributions through a Special Reserve

10. Criteria for Distributions from a Special Reserve Fund

11. Are Shares or Percentages Fixed at the Beginning of the Year, Determined at the End of the Year, or Some Combination of the Two?

12. How Firm’s Oversee the Compensation Committee or Other Compensation-Determining Bodies

13. Consequences for Partners of the Failure to Collect Arrears

14. Role of the Initiation of New Business in the Distributions to Shareholders

15. How is the Generation of Favorable Publicity Taken into Account in Shareholder Distributions

16. Use of the Secret Ballot in Compensation-Related Votes

17. Impact of Alternative Fee Arrangements

18. Frequency of Disputes over Credit for Business Origination

List of Tables:

Table 1.1 How fair is your firm's compensation scheme for partners/shareholders?
Table 1.2 How fair is your firm's compensation scheme for partners/shareholders? Broken out age of survey participant
Table 1.3 How fair is your firm's compensation scheme for partners/shareholders? Broken out by Gender of Survey Participant
Table 1.4 How fair is your firm's compensation scheme for partners/shareholders? Broken out by Number of lawyers in the firm
Table 1.5 How fair is your firm's compensation scheme for partners/shareholders? Broken out partners and of counsel
Table 1.6 How fair is your firm's compensation scheme for partners/shareholders? Broken out by Area of expertise
Table 2.1 Should your firm's compensation scheme for partners be changed or not?
Table 2.2 Should your firm's compensation scheme for partners be changed or not? Broken out age of survey participant
Table 2.3 Should your firm's compensation scheme for partners be changed or not? Broken out by Gender of Survey Participant
Table 2.4 Should your firm's compensation scheme for partners be changed or not? Broken out by Number of lawyers in the firm
Table 2.5 Should your firm's compensation scheme for partners be changed or not? Broken out partners and of counsel
Table 2.6 Should your firm's compensation scheme for partners be changed or not? Broken out by Area of expertise
Table 3.1 The process by which compensation for shareholders is determined at your firm is how transparent?
Table 3.2 The process by which compensation for shareholders is determined at your firm is how transparent? Broken out age of survey participant
Table 3.3 The process by which compensation for shareholders is determined at your firm is how transparent? Broken out by Gender of Survey Participant
Table 3.4 The process by which compensation for shareholders is determined at your firm is how transparent? Broken out by Number of lawyers in the firm
Table 3.5 The process by which compensation for shareholders is determined at your firm is how transparent? Broken out partners and of counsel
Table 3.6 The process by which compensation for shareholders is determined at your firm is how transparent? Broken out by Area of expertise
What should be changed about your firm's compensation formula for partners?
Table 4 About what percentage of revenues beyond overhead expenses that is distributed to partners/shareholders is in the following forms:
Table 4.1.1 About what percentage of revenues beyond overhead expenses that is distributed to partners/shareholders in Salaries
Table 4.1.2 About what percentage of revenues beyond overhead expenses that is distributed to partners/shareholders in Salaries Broken out age of survey participant
Table 4.1.3 About what percentage of revenues beyond overhead expenses that is distributed to partners/shareholders in Salaries Broken out by Gender of Survey Participant
Table 4.1.4 About what percentage of revenues beyond overhead expenses that is distributed to partners/shareholders in Salaries Broken out by Number of lawyers in the firm
Table 4.1.5 About what percentage of revenues beyond overhead expenses that is distributed to partners/shareholders in Salaries Broken out partners and of counsel
Table 4.1.6 About what percentage of revenues beyond overhead expenses that is distributed to partners/shareholders in Salaries Broken out by Area of expertise
Table 4.2.1 About what percentage of revenues beyond overhead expenses that is distributed to partners/shareholders in Distribution of Profits
Table 4.2.2 About what percentage of revenues beyond overhead expenses that is distributed to partners/shareholders in Distribution of Profits Broken out age of survey participant
Table 4.2.3 About what percentage of revenues beyond overhead expenses that is distributed to partners/shareholders in Distribution of Profits Broken out by Gender of Survey Participant
Table 4.2.4 About what percentage of revenues beyond overhead expenses that is distributed to partners/shareholders in Distribution of Profits Broken out by Number of lawyers in the firm
Table 4.2.5 About what percentage of revenues beyond overhead expenses that is distributed to partners/shareholders in Distribution of Profits Broken out partners and of counsel
Table 4.2.6 About what percentage of revenues beyond overhead expenses is distributed to partners/shareholders in Distribution of Profits Broken out by Area of expertise
How many key players determine the shareholder compensation scheme at your firm? Is it all partners? A particular class of partner? The compensation committee? We are asking: who holds predominant or ultimately decisive power?
Table 5.1 Does your firm have a reserve which is excluded from revenue distribution to shareholders under a percentage of allocation or units of participation scheme, but is then distributed to shareholders under a different set of criteria?
Table 5.2 Does your firm have a reserve which is excluded from revenue distribution to shareholders under a percentage of allocation or units of participation scheme, but is then distributed to shareholders under a different set of criteria? Broken out age of survey participant
Table 5.3 Does your firm have a reserve which is excluded from revenue distribution to shareholders under a percentage of allocation or units of participation scheme, but is then distributed to shareholders under a different set of criteria? Broken out by Gender of Survey Participant
Table 5.4 Does your firm have a reserve which is excluded from revenue distribution to shareholders under a percentage of allocation or units of participation scheme, but is then distributed to shareholders under a different set of criteria? Broken out by Number of lawyers in the firm
Table 5.5 Does your firm have a reserve which is excluded from revenue distribution to shareholders under a percentage of allocation or units of participation scheme, but is then distributed to shareholders under a different set of criteria? Broken out partners and of counsel
Table 5.6 Does your firm have a reserve which is excluded from revenue distribution to shareholders under a percentage of allocation or units of participation scheme, but is then distributed to shareholders under a different set of criteria? Broken out by Area of expertise
If your firm has such a reserve what percentage of total revenues distributed to shareholders (or to others if the reserve has such provisions) is distributed through this reserve?
How are the criteria for revenue distribution through the reserve different from revenue distribution through the general formula used for most revenue distribution?
Table 6.1 If revenues beyond overhead are distributed according to shares held or percentages granted are these shares fixed at the beginning of the year, at the end of the year, or some combination of the two.
Table 6.2 If revenues beyond overhead are distributed according to shares held or percentages granted are these shares fixed at the beginning of the year, at the end of the year, or some combination of the two. Broken out age of survey participant
Table 6.3 If revenues beyond overhead are distributed according to shares held or percentages granted are these shares fixed at the beginning of the year, at the end of the year, or some combination of the two. Broken out by Gender of Survey Participant
Table 6.4 If revenues beyond overhead are distributed according to shares held or percentages granted are these shares fixed at the beginning of the year, at the end of the year, or some combination of the two. Broken out by Number of lawyers in the firm
Table 6.5 If revenues beyond overhead are distributed according to shares held or percentages granted are these shares fixed at the beginning of the year, at the end of the year, or some combination of the two. Broken out partners and of counsel
Table 6.6 If revenues beyond overhead are distributed according to shares held or percentages granted are these shares fixed at the beginning of the year, at the end of the year, or some combination of the two. Broken out by Area of expertise
If your firm has a compensation committee or other kind of body that makes initial judgements on revenue distribution to shareholders, how are its methods and judgements overseen or monitored by the broader firm?
To what degree would you say that failure to collect arrears or late or faulty submission of time sheets can impact the distribution of revenues to shareholders?
How is skill or the lack of it in the initiation of new business taken into account in the distribution of revenues to shareholders?
In what ways are the generation of favorable publicity through blog postings, articles in the trade and popular press, speeches and lectures and media appearances taken into account in the distribution of revenues to shareholders?
Table 7.1 Does the firm use a secret ballot, either in its compensation or management committees, or for all shareholders, to vote on profit distribution issues?
Table 7.2 Does the firm use a secret ballot, either in its compensation or management committees, or for all shareholders, to vote on profit distribution issues? Broken out age of survey participant
Table 7.3 Does the firm use a secret ballot, either in its compensation or management committees, or for all shareholders, to vote on profit distribution issues? Broken out by Gender of Survey Participant
Table 7.4 Does the firm use a secret ballot, either in its compensation or management committees, or for all shareholders, to vote on profit distribution issues? Broken out by Number of lawyers in the firm
Table 7.5 Does the firm use a secret ballot, either in its compensation or management committees, or for all shareholders, to vote on profit distribution issues? Broken out partners and of counsel
Table 7.6 Does the firm use a secret ballot, either in its compensation or management committees, or for all shareholders, to vote on profit distribution issues? Broken out by Area of expertise
How has the growth of alternative fee arrangements impacted the firm's compensation formulas?
Table 8.1 How common are disputes at your firm over credit for business origination?
Table 8.2 How common are disputes at your firm over credit for business origination? Broken out age of survey participant
Table 8.3 How common are disputes at your firm over credit for business origination? Broken out by Gender of Survey Participant
Table 8.4 How common are disputes at your firm over credit for business origination? Broken out by Number of lawyers in the firm
Table 8.5 How common are disputes at your firm over credit for business origination? Broken out partners and of counsel
Table 8.6 How common are disputes at your firm over credit for business origination? Broken out by Area of expertise

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