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I have a pretty elementary question about partner compensation at firms. In most firms, are partners equity partners? How is the yearly dividend calculated? Are partners paid a salary in addition to a dividend, and in general, how often is a dividend paid? If anyone with firsthand knowledge can give a little 'partner compensation primer' it would be much appreciated.

Thanks.

ChrisC wrote:I have a pretty elementary question about partner compensation at firms. In most firms, are partners equity partners? How is the yearly dividend calculated? Are partners paid a salary in addition to a dividend, and in general, how often is a dividend paid? If anyone with firsthand knowledge can give a little 'partner compensation primer' it would be much appreciated.

Thanks.

There are non-equity partners, which are pretty much an extended version of senior associates. These guys are referred to the public as "Partner" though.

ChrisC wrote:I have a pretty elementary question about partner compensation at firms. In most firms, are partners equity partners? How is the yearly dividend calculated? Are partners paid a salary in addition to a dividend, and in general, how often is a dividend paid? If anyone with firsthand knowledge can give a little 'partner compensation primer' it would be much appreciated.

Thanks.

Most partners are equity partners but there are non-equity partners at some firms. This has a different function in each firm. At some non-equity partnership is a junior level on the way to full partnership and other times this is where service partners go.

Firms vary widely and compensation is computed very differently between them. Even withing firms, partners negotiate different deals, especially if they are a lateral hire. Some firms pay partners on a scale according to how many points they have in the partnership that is lockstep for years of service. On the other end of the spectrum are eat what you kill partnerships where their comp is determined by business origination credits and some firms do a mix of the two.

Partners are not usually paid a salary in addition to their draw. Draws are generally made once or twice a month. But the firm usually has the latitude to adjust the timing and amount of a partner's equity draw depending on capital reserves, etc.

Last, you might not know that partners are expected to put in a capital contribution when they are elevated to partner, usually in the form of a comp hold back or loan from the firm. Sometimes, though, firms will make partners go get loans to pay in.

A close relative of mine was a partner at a vault firm. He said that every year, by rule, partners were allowed to look at the 'book' and see how much everyone made. It was common knowledge, however, that anybody who looked at 'the book' would take a pay cut the next year

Which is a long-winded way of saying: It's entirely possible that nobody knows, other than 'a lot of money' and 'it depends on how much work the firm / partner brings in'

Some firms, like Skad, send the books to all partners for inspection.