Reed Smith asks non-equity partners to pay to retain partnership status
Reed Smith is set to ask its non-equity partners to contribute up to 15% of their base pay to the firm in order to maintain their partnership status. Those non-equity partners who do not agree to the terms will lose their partnership status and instead can "opt to be a kind of salaried employee without those attributes of partnership," said global managing partner Greg Jordan. The exact title those non-participants will carry is unclear.
November 16, 2009 at 05:41 AM
3 minute read
Reed Smith is set to ask its non-equity partners to contribute up to 15% of their base pay to the firm in order to maintain their partnership status, reports The Am Law Daily.
Those non-equity partners who do not agree to the terms will lose their partnership status and instead can "opt to be a kind of salaried employee without those attributes of partnership," said global managing partner Greg Jordan. The exact title those non-participants will carry is unclear.
Jordan (pictured) said that the move is aimed at unifying partnership standards across the firm's international offices, though it has unnerved a chunk of the non-equity partner ranks, according to three sources familiar with the matter.
Some non-equity partners outside of the US have a financial stake in the firm while those in the US do not, and the initiative, which will be rolled out in the coming months, is intended to clear up that problem by ensuring that anyone with the word "partner" in his or her title has something invested in Reed Smith, said Jordan.
"It's about not just saying you're a partner, but actually being one," Jordan said. "It means something. It revolves around risk-sharing in the business."
Jordan stressed that the move is not simply meant to provide a quick-fix cash injection or as a way of culling the firm's non-equity partnership. "People could say, 'Oh, Reed Smith must need the money,' but the reality is we are having a very strong year," he says. "And if you wanted to just trim non-equity partners, there are much easier ways to do that."
Under the plan, non-equity partners will have three choices: pay the required percentage into the firm and become what Jordan calls "fixed-share partners"; decline the option and leave the partnership; or shift into the fixed-share system more slowly over the next couple of years.
"We're trying to keep the partnership aligned, not to create a situation that is so jarring that a given person can't deal with it," said Jordan.
Though there was no formal vote to approve the initiative, Jordan said he has held extensive talks with equity partners and non-equity partners worldwide and found substantial support for the move.
The initiative comes in the wake of two rounds of layoffs at Reed Smith in the last 11 months. In April the firm laid off 26 associates and 55 staf, while in December 2008, 115 members of staff were let go.
Last week news emerged that the firm is set to cut first-year associate salaries by 20% and reduce first-year billing rates by approximately the same percentage.
This article first appeared on The Am Law Daily blog on americanlawyer.com.
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