Equity Partners Seeing Huge Income Gains
The law firm Major, Lindsey & Africa has recently published another Partner Compensation Survey, the eighth in a series of biennial surveys since 2010. The survey aims to provide comprehensive insights into partner compensation ranges.
Survey responses were collected via an online questionnaire administered by a third party to protect confidentiality and anonymity. The sample groups were selected by sending invitations containing a link to the questionnaire to 53,587 partners across the United States at AmLaw 200 firms.
The data confirms some recurring themes in the Big Law compensation landscape, such as increased compensation, billing rates, and disparities between equity and non-equity partners. Let’s take a look at the results.
Partner Compensation Growing Rapidly
The survey revealed significant increases in both average and median compensation for partners. Over the last ten years, the average compensation for AmLaw 200 partners has nearly doubled. In the 2024 survey, the average reported compensation is $1,411,000. This was a 26% increase from the 2022 survey and almost double the $716,000 average reported in the 2014 survey.
The median compensation is also growing, although less dramatically (which is expected for the median compared to the mean). The median compensation for all 2024 respondents was $800,000, which is up 19% from the 2022 survey ($675,000) and 68% from the 2014 survey ($475,000). This increase in median compensation suggests a broad upward trend in partner earnings, although it is not as pronounced as the increase in average compensation. Comparing the growth of the mean to the median indicates that compensation at the highest levels is growing at a more substantial rate.
Equity vs. Non-Equity Partners
What about the breakdown between equity partners and non-equity partners?
Equity partners, also known as "shareholders" or "owners," are attorneys who have a financial stake in the law firm. As their name implies, they own a percentage of the firm's shares or equity. They receive a share of the firm's profits, usually based on their individual performance or a predetermined formula. They also typically have a longer tenure with the firm and have demonstrated a high level of commitment and contribution. Non-equity partners, also known as "income partners" or "salary partners," don’t own shares or equity in the firm and receive a salary or a fixed income.
Knowing the stark difference in the compensation structure between equity and non-equity partners, it shouldn’t surprise you that the survey showed significant disparities between the two groups in terms of compensation and other related metrics.
Equity Partners Earn Much More
Equity partners reported an average compensation of $1,937,000, which is more than three times higher than the $558,000 average compensation reported by non-equity partners. This disparity is consistent with findings from previous surveys, such as the 2014 Survey, where equity partners earned an average of $971,000 compared to $338,000 for non-equity partners. A substantial portion of equity partners (42%) earned over $1,500,000 in 2023, whereas more than 50% of non-equity partners earned less than $500,000. This highlights the concentration of higher earnings among equity partners.
Since the 2022 survey, average compensation for equity partners increased by 32%, while non-equity partners saw a 21% increase. These are the largest increases recorded in the survey's history, indicating significant market forces at play, particularly in retaining and attracting non-equity level talent.
Some of the disparity we see can be explained by more than just the equity. The average hourly billing rate for equity partners was $1,218, which is 26% higher than the $935 reported for non-equity partners. On the other hand, equity partners reported an average of 1,704 billable hours, slightly less than the 1,750 hours reported by non-equity partners. Despite working slightly fewer hours, equity partners earn significantly more, presumably because of a combination of their equity pay and their higher billing rate.
Origination Matters
However, just because equity partners are working fewer billable hours doesn’t mean they’re putting in fewer “actual hours” for the firm. When we consider origination, equity partners continue to generate significantly more business than non-equity partners.
"Origination" refers to the process by which a lawyer is credited with bringing a new client or legal matter to the firm. It is often a significant factor in law firm compensation and incentive structures, as it recognizes and rewards attorneys for their ability to attract and retain clients. The survey reports that the average originations for all respondents in 2024 were $3,476,000. This represents a 26% increase from 2022 and a 78% increase from 2014 and suggests the presence of high outliers, indicating that some partners are generating substantially more business than others.
In 2024, equity partners reported average originations of nearly $5,000,000. This was a 32% increase from 2022, compared to a 5% increase for non-equity partners, who reported average originations of $971,000.
Gender Gap: Not as Wide as You’d Think
Male partners earned an average of $1,662,000 in 2023, which is 29% higher than the $1,239,000 average earned by female partners. This gap, although significant, has narrowed from the 44% differential reported in the 2014 survey and the 34% differential in the 2022 survey.
While men continue to out-earn women, the data also indicates a potential for the scales to tip the other way in the near future. For the first time in the survey's history, the rate of increase in compensation for women matched that of men, with both groups experiencing a 37% rise since the 2022 Survey.
The publishers of the study conducted a regression analysis and found that originations and billing rates are the most statistically significant variables influencing compensation, with gender not showing a statistically significant impact on compensation variability. But at the same time, the study showed that male partners reported average originations of $3,900,000, a 29% increase from the 2022 survey. Female partners reported an 18% increase, with average originations of almost $2,400,000.
Ethnicity Gap Closing In
The survey also reveals a narrowing compensation gap between partners of diverse ethnicities and those identifying as white.
In 2024, ethnically diverse partners reported average compensation that was 4% lower than white (non-Hispanic) partners ($1,355,232 vs. $1,416,893). This is a significant shift from 2014, where ethnically diverse partners reported double-digit pay discrepancies compared to their white counterparts.
It is important to note that the compensation gap varies across different ethnicities, with some facing wider disparities than others. But the study had only a relatively small number of respondents in certain ethnic categories, so it couldn’t draw statistically meaningful conclusions more narrowly.
Related Resources:
- Transactional Work, Billing Rates, and Demand Driving Law Firm Growth (FindLaw's Practice of Law)
- Are Non-Equity Partnerships Really that Bad? (FindLaw's Practice of Law)
- Why Title Changes for Associates May Help a Firm Retain Talent, Attract Clients (FindLaw's Practice of Law)
