When longtime Bingham McCutchen chairman Jay Zimmerman gave his end-of-year reckoning at the annual partner retreat in Bermuda last October, he didn’t mince words. After riding the recession to record profitability and revenue, the firm had seen demand tapering since 2012. Billings were down by a quarter. Meanwhile, costs were up: In 2013, for a second year, the firm had sunk $11.5 million into its new back-office center in Lexington, Ky., shaving $80,000 off average equity partner earnings. And about a dozen lateral partners holding guarantees would have to be fully compensated, leaving remaining partners to absorb the brunt of profit declines.
For those who’d been paying attention to Zimmerman’s monthly financial reports—the 795-lawyer firm is fully transparent about finances and individual compensation—the news wasn’t unexpected. Several high-value litigation and restructuring matters had ended and hadn’t been replaced. The surprise, however, was that the pain would not be shared equally among its 298 partners. Though almost everyone would take some of the hit, partners whose practices had slowed the most, or whose bills had been heavily discounted, would not see their final 2013 distribution—25 percent of total compensation, to be paid out to partners in May or June of the following year. Reductions ultimately ranged from $50,000 or so, typically for junior partners, to roughly $500,000 for partners at higher tiers, according to former partners. (Partner compensation ranges from about $500,000 to $3.5 million, according to a former partner.) “The real issue was partner performance,” says one, asking not to be identified. “There just wasn’t enough work.” After the meeting, partners began to jump ship. Twenty-eight left between October and mid-April, joining 34 who had departed earlier in 2013, according to data collected by The American Lawyer. (According to the firm, four of those retired; the firm also added 20 partners during the same period.)
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