Lower Pay for Women Partners

In the face of a glaring pay gap between male and female law firm partners, some firm leaders point to the emphasis on origination credit (bringing in new business) as the key culprit. But moving away from such a model may not be so easy. A survey released in early October by Major, Lindsey & Africa showed that male law partners are paid 44% more than female law partners, on average. Among the survey respondents, all partners at large firms, the average male partner makes $949,000, compared with $659,000 for the average female partner. Based on those numbers, women partners make 69 cents for every dollar male partners make. See, “2016 Partner Compenasdation Study,” available for downlaod at http://bit.ly/2dvMkrp. “I'm disappointed, but I'm not surprised,” said Beth Wilkinson, a trial lawyer formerly with Paul, Weiss, Rifkind, Wharton & Garrison who co-founded the boutique Wilkinson Walsh + Eskovitz this year. “Firms pay people based on two basic things: hours and bringing in business. Both, I think, are a challenge for women over their careers.” The Numbers Jeffrey Lowe, managing partner in Major, Lindsey & Africa's Washington, DC, office and author of the study, made a similar observation. Origination and working attorney receipts have become the main determinants of partner compensation, he said. Women did see a larger rise in origination than men in the latest survey, with originations by women growing 40% compared with an 18% rise for men. But it wasn't enough to bridge the gap between overall originations between the sexes. According to the survey, male partners reported average origination of $2.59 million while female partners reported $1.73 million in average origination. “That's the crux of the issue: Why are men generating more business than women?” Lowe said. “Is there some boys' club aspect or not?” Lisa Smith, a principal at consulting firm Fairfax Associates, also believes that the origination gap is a major cause of the compensation gap between men and women partners. Some of that may be due to undercrediting, particularly if women fight less for their origination credit than their male counterparts do, she said. “What's more fundamental is sort of the sponsorship and mentorship along the way,” Smith said. “I think that's where the gaps happen — women aren't always brought along in the same way” as men. But Mark Stewart, chairman of Ballard Spahr, said his firm determined that focusing on origination was not the best way to determine compensation. An emphasis on origination “can perpetuate unfairness to certain groups,” Stewart said. “We don't have those battles about who actually brings in clients.” Ballard Spahr took a hard look at origination when it re-evaluated its compensation system, he said, and created a system he says is more fair. Instead of origination credits, the firm has a relationship partner for each client, then provides billing credits for partners who work on the matters that result from those relationships. Initiatives David Hashmall, chairman of Goodwin Procter, said his firm is undertaking a number of initiatives to address the gender pay gap in law. One of the moves, he said, will be assessing the firm's practices against the recommendations of the ABA's Commission on Women in the Profession. Yet even for firms dedicated to advancing gender parity, change could take years. Lewis Rose, managing partner of Kelley Drye & Warren, described how the firm plans to increase the number of female lawyers on its management committee and its compensation committee in the near future. Diversity in leadership will aid leadership throughout the firm, he said. The compensation group, an appointed body of four, will increase from one to two female members next year, and the 10-person management committee could increase from two to three female members through an election, Rose said. At the same time, the firm started a sponsorship program for younger women to better connect with office and practice leaders. The firm also doesn't compensate solely based on origination credit, and instead has a months-long memo and interview process to determine salaries. Women and men grouped slightly below, into the firm's “top tier” below the all-stars, are equitably split, Rose said. The system is fair, and he's received no complaints of gender disparity, he said. Orrick, Herrington & Sutcliffe took its approach one step further than Kelley Drye. The firm counts each year how many women versus men step up in compensation, and reports the results to its partners. A firm spokesperson called it an “equity test” that evaluates compensation decisions “for unconscious bias” before pay is finalized. Historically, female equity partners' salaries have always lagged behind men, even more so than the gap between nonequity partners' and associates' salaries by gender. The ALM Annual Survey of Law Firm Economics (available for purchase at http://bit.ly/2erQIcn) found last year that female equity partners made, on average, 77 cents to every dollar male partners made. Previous years back to 2010 looked about the same, at 79 cents for female equity partners to every dollar of compensation for men. Changing the compensation system will not single-handedly create parity, Smith said, as qualitative judgments will likely continue to play a role, and the nature of those judgments are not going to change with the system. “I don't know that de-emphasizing origination is going to close the pay gap,” Smith said. “Without rewarding the people who bring business to the firm, it's hard to have a firm.”

***** Lizzy McLellan and Katelyn Polantz are reporters for The Recorder, an ALM sibling publication of this newsletter. Susan Beck and Rebecca Cohen contributed to this report.