Major Shift in Firm Structure
Cleary Gottlieb Steen & Hamilton, a prominent U.S. law firm, has introduced a new category of non-equity partners, joining a growing trend among top law firms moving away from the traditional single-tier partnership model. Historically, all partners at Cleary held equity in the firm, but this shift marks a significant strategic decision aimed at fostering growth and innovation.
According to a spokesperson for Cleary, the introduction of non-equity partners is “an important step for Cleary as we continue to strategically grow.” The new structure is intended to enhance talent retention and development, ensuring that the firm can attract and maintain top legal professionals.
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Financial Performance and Global Reach
Cleary Gottlieb, founded in New York, reported strong financial results in 2023. With 180 partners, the firm generated over $1.4 billion in total revenue, and the average profit per equity partner stood at $4.5 million, according to data from The American Lawyer. The firm operates globally, employing around 1,100 lawyers across various offices worldwide.
Growing Trend Among U.S. Law Firms
The decision to adopt a non-equity partner tier is not unique to Cleary. Many U.S. law firms have long utilized a two-tiered system where some partners, often termed “income partners,” do not hold equity in the firm. These non-equity partners, who typically earn less than their equity counterparts, may be promoted from within or hired externally.
Several rival firms, including Wilmer Cutler Pickering Hale and Dorr, have also implemented non-equity partner tiers in recent years. Firms like Paul, Weiss, Rifkind, Wharton & Garrison, and Cravath, Swaine & Moore have also introduced salaried partner positions. This model helps attract top legal talent by offering the prestige of the partner title while enhancing profitability for equity partners.
Immediate Implementation of the New Structure
Cleary’s new non-equity partnership tier is being implemented immediately, and the firm is currently considering candidates as part of its annual promotion cycle. The managing partner, Michael Gerstenzang, who has led the firm since 2017, was unavailable for comment on the new structure.
Industry-Wide Shift to Two-Tier Partnerships
The introduction of non-equity partners reflects a broader shift in the legal industry, where the number of firms operating under a single-tier partnership model has steadily declined over the years. According to a report by Citi Global Wealth at Work Law Firm Group and Hildebrandt Consulting, 85% of large U.S. law firms with income partners increased the number of non-equity partners between 2017 and 2022, underscoring the growing popularity of this structure.
The move toward multi-tiered partnerships allows firms to adapt to changing market demands, offering flexibility in compensation and opportunities for talent development. It also helps maintain a competitive edge by ensuring equity partners can maximize profitability while still offering growth opportunities for up-and-coming legal professionals.
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