When Partner Distributions Are Cut, Should Clients Worry?
AmLaw Daily contains an interesting post today noting that several UK firms were cutting their profit sharing. From the post:
Several big-name U.K. firms have cut or delayed quarterly profit distributions to partners to cushion the blow of the continued recession.
Interesting choice of words--"cushion the blow." The translation is that we don't have enough profits to give them to the shareholders. The post goes on to point out:
The same phenomenon has been occurring in the U.S. In March, we broke the story about Dewey & LeBoeuf severely cutting monthly draws to under-performing partners and holding back some larger distributions. Later that month, DLA Piper slashed partner pay by 11.5 percent.
Many other firms have been identified in various reports as having taken similar steps. One reason may be the firm's covenants in their bank line agreements, many of which contain performance criteria. But whatever the reason, the bottom line is that firms don't have enough money to make distributions to partners.
Okay, so the firms have slashed expenses and personnel and there still isn't profit there for the partners. So what kind of pressure to extract money from clients do you think partners feel from their peers? If I were a client, I'd be watching my wallet more now than ever.
