Financially Strapped Firms Are Cutting Partners

Due to what an industry observer calls “overcapacity issues,” more law firms are subjecting partners to the process called de-equitization, meaning they are shut out of profit distribution. It’s happened before, but the current wave of de-equatizations are pretty severe, according to an article in the New York Times. Even so, it’s not happening as often as it should on the basis of cold economics, according to a study by Altman & Weil. Firms are sometimes reluctant to do it for personal or political reasons, or because they figure their reputations will suffer as a result. De-equitized partners may be retired or reduced to salary status, or they may choose to leave. There are also, however, attorneys who have affirmatively chosen non-equity status for a variety of reasons, among them the fact they won’t be liable if the firm gets sued – and the hours tend to be better.