International Women’s Day is coming up this Friday. Time for the law firms to make lots of social media posts to convey that they support women. Put up a picture with the 5 (likely white) female equity partners they could round up. And then forget about it tomorrow. (I’m undecided on whether those posts are better than the silence I heard at most of my former workplaces.)

Rather than engaging in meaningless gestures, the most powerful thing legal employers can do to support women is pay them. When we talk about increasing gender parity in the legal profession, it’s the single most powerful thing. That’s because what we’re paid is symbolic—because it shows how much we are valued. But more importantly, as women earn more money, they gain security, power, and freedom. And with all of those things comes the ability to change virtually everything we talk about in this newsletter.

Here’s what Ellevest recently had to say about the coming transfer of $80 trillion of wealth to women (mostly Millenials):

Yet despite the fact that women lawyers do the same work as men, it’s well-known that women lawyers are dramatically undercompensated compared to their male counterparts. The difference is even greater at the partnership level.

We could posit lots of reasons why women partners are paid so much less than men in the same position, but to do so we need to delve into how partners are paid. Then we can ask whether there are partnership compensation models that are better for women. As with many questions we ask in this newsletter, while there aren’t clear answers, there are some things that you can look for if you’re hoping to become a partner in your law firm.

Women Lawyers Make Less Than Their Male Counterparts

The gender pay gap is alive and well in the legal profession, particularly at the partner level.

According to a 2022 Partner Compensation Survey conducted by Major, Lindsey & Africa and Law360 Pulse that included responses from 1,815 partners across the United States, an average male partner’s total compensation is 34% more than an average female partner’s. In addition, male partners—as they have for decades—continue to significantly outpace female partners in originations (a $3,045,000 versus $2,022,000 average).

Slightly older data show that across the AmLaw 200, the median female equity partner makes 86% of what the median male equity partner makes, while non-equity women partners make 89% of what non-equity men partners make.

As with virtually everything we talk about for women lawyers, these numbers are far worse for women of color.

The Pros and Cons of Various Partnership Compensation Models

In order to understand how this vast disparity in compensation occurs, it’s important to understand how law firms pay partners. It is defects in these models that allow women partners to continue to be paid so much less than men partners.

Lockstep Compensation

Lockstep compensation is a system where all partners with the same level of seniority are paid equally. The longer someone has been at a firm, the more he or she will earn. It’s the model that most large law firms continue to use for associates (something we’ll discuss in another issue). While the lockstep compensation model used to be the most common, most large law firms have since moved away from the model, at least in its purest form.

Advocates of the model state that lockstep compensation promotes teamwork and camaraderie within firms, and eliminates fights over origination and contribution. Critics of the model contend that it fails to sufficiently reward high-performers. I sure as heck wouldn’t want to be paid based solely on the length of time I’d been working at a firm. Nor would I want to pay people that way.

In theory, the lockstep type of compensation model would seem to correct inherent gender bias by paying women at a certain level the same as men at that level. However, it doesn’t work that way in practice. Instead, lockstep compensation tends to reward less productive older partners (mostly men) at the expense of younger ones. It rewards partners for just hanging on and, since most senior partners are men, even though lockstep compensation looks egalitarian, it really isn’t.

Because a pure lockstep model is difficult to make work, many law firms have modified the model to allow them to encourage certain behaviors (such as business development, high billing, or firm management) and to penalize less productive partners. For example, a high-performing partner may be slotted in a higher band than partners with the same seniority, or there may be discretionary funds set aside to reward partner behavior consistent with the firm’s values.

While modifying pure lockstep compensation may mitigate some of its effects, when those modifications end up giving a managing partner or compensation committee more discretion, that may create other problems described below with black box compensation models.

Black Box Compensation

While few large law firms on the defense side have pure black box compensation models, they are more common on the plaintiffs’ side of things. In black box compensation models, the managing partner or compensation committee sets compensation for each partner in the firm. In more traditional law firms, at the beginning of the year, each partner is told how much he or she will make in the coming year, with certain budget assumptions. There is no formula used to allocate profits, and partners aren’t allowed to discuss compensation. In plaintiff law firms, where year-end profits are more difficult to predict at the beginning of the year, attorneys are awarded a bonus based solely on the discretion of a managing partner or committee.

As you might imagine, black box compensation models work where there is trust in the managing partner or committee who divvies up the spoils. If you’re not going to be given the criteria that will be used to evaluate your performance—and if that criteria could conceivably change every year—you need to have faith that the standardless discretion given to the managing partner or committee will be fairly used. If that trust isn’t present, blackbox compensation systems simply allow favoritism within the firm to persist unchecked.

While in theory blackbox compensation could benefit women because it eliminates fights over client origination, it’s hard to advocate for any type of “black box” compensation model for women or any other underrepresented group. When compensation decisions are made behind closed doors, they don’t usually benefit women. This is particularly true because, as one ABA report shows, the vast majority of managing partners or compensation committees who make these decisions are white men.

Eat What You Kill

In this type of compensation model, partners are paid based on the revenue they bring in. The more hours they bill, and the more clients they bring in, the more money partners make. As you might imagine, in addition to disincentivizing partners from sharing work and engaging in cross-promotion of practice areas, this model leads to disputes about who brought in the business.

For years, most firms adopted the “first touch rule” of business generation, under which the lawyer who initially brought in a client received the origination credit for as long as that partner remained at the firm. This ensconced at the top the white men who led law firms for decades, and created an enormous income gap between those older rainmakers and other partners at law firms. It meant that partners who brought in new matters for those same clients, or who maintained those relationships, or who worked on the matters brought in, were not financially rewarded for their efforts.

Of course, the partners who suffered from the first touch rule were often women. According to a 2010 report from the American Bar Association Commission on Women in the Profession, the Minority Corporate Counsel Association, and the Project for Attorney Retention, based on a survey of almost 700 women law firm partners, just over 80% of white women income partners and 84% of minority women reported having some dispute over origination credit. Nearly one-third (32%) of white income partners, and one-fourth (27%) of white equity partners, reported that a partner had tried to intimidate, threaten or bully her into backing down in a dispute over origination credit. Those numbers were nearly double for minority women.

Partially as a result of the above report and the growing recognition that law firm origination policies unfairly favor older white men, many law firms have developed compensation models that allow partners to share credit for business generation. When such criteria are clearly articulated, such efforts can undoubtedly benefit women.

In addition, because a pure eat-what-you-kill model only rewards revenue generation, some firms have further modified the approach to reward specific performance metrics. While these usually include retaining clients and billing hours just as the eat-what-you-kill model does, modified models may also reward client service or contributions to the firm itself. These additional modifications also benefit women—because we tend to do the unpaid work that goes uncompensated in pure eat-what-you-kill firms.

Hybrid Models

Many firms have hybrid models of compensation where the models described above are combined. For example, base pay might be based on the lockstep model, with bonuses paid based on a black box, with additional money for business generation based on eat-what-you-kill.

Which of These Models Are Better for Women Lawyers?

So, you ask, which of these models are better for women partners? I’m unaware of any study that has specifically addressed this issue and, given the wide-variety of compensation models utilized by law firms, it would be difficult to systematically do so.

That being said, there are undoubtedly characteristics of each of the above compensation models that benefit white men more than women. And there are some red flags you should look for that will make it more likely than not that you will not be fairly paid:

• Models—like pure lockstep compensation—that attempt to freeze largely white male senior leadership into upper levels of compensation will not benefit women. If we continue at the current pace, t’s not anticipated that women will achieve gender parity in the law for more than 100 years. And, as long as there are more men at the top than women, lockstep compensation models will benefit white male partners.

• Models—like blackbox compensation—that give unfettered discretion to a white-male managing partner or a management committee largely made up of white males to make decisions behind closed doors will not help women. Seek law firms that articulate clear compensation criteria so that you have a level playing field.

• Models—like eat-what-you-kill—that allow origination credit to be awarded only to the male partner who originally brought in the client or otherwise do not allow origination credit to be shared, hurt women. Find out what your law firm’s origination policy is and how it is applied. Plaintiffs’ firms in particular are notoriously bad about drafting these types of policies, so they are often interpreted inconsistently from year-to-year and favor the men who run those firms and their buddies. If your firm’s origination policy isn’t in writing, insist that it be memorialized.

Is your firm doing things to make sure women partners are fairly compensated? Write me about it!

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