For Some Dechert Rainmakers, Bonuses Come With Golden Handcuffs

Dechert LLP is increasingly threatening to take back bonus money from partners who leave the firm.

Within the last year, multiple Dechert partners have been given signing bonuses with strings attached. The firm says it will force the lawyers to return the money if they leave within a certain time frame, according to three people familiar with the matter.

Bonus clawback provisions are not a new retention tool for law firms. They have grown in popularity—along with strategies like withholding deferred compensation and offering forgivable loans—as firms defend against poachers in a competitive lateral market.

“The firms don’t want to lose people so there are different tactics and strategies they can employ to make it difficult for them to extract themselves from the firm and extract their client base because the firms that are hiring laterally want both,” said Robert Zinn, a partner recruiter with global search firm Major Lindsey & Africa.

A Dechert spokesperson declined to comment. The sources familiar with the situation spoke on the condition of anonymity to avoid professional repercussions.

Dechert’s use of clawback provisions has grown amid post-pandemic financial volatility. The firm’s profits per equity partner declined by more than 15% in the two years since reaching a record $4.23 million in 2021, according to data published by The American Lawyer. Dechert cut costs by announcing they’re closing offices in Beijing, Hong Kong and Chicago earlier this year.

Eight-figure pay days for lateral partners in lucrative deal practices have put the pressure on firms to protect themselves from losing valuable lawyers and their client relationships. Firms looking to discourage rainmaker exits also have turned to mechanisms like spreading out deferred pay distribution and withholding pay from partners who leave.

“Some spread [payment] out through the next of the year,” said Sabina Lippman, a partner recruiter and cofounder of Lippman Jungers. “Certain firms manipulate when they push it out. It forces the destination firms to feel the breakage doesn’t make it worth it.”

In July, Kirkland & Ellis adopted a policy to withhold deferred pay for departing partners. Kirkland, the world’s highest-grossing firm, gives partners more than half their pay after the end of the year in which they earn it and has the discretion to withhold pay under the new policy.

Allen & Overy and Shearman & Sterling, two firms that merged this year, offered equity partners loans that could be forgiven if they stay for a certain period. The move was designed to prevent departures in the lead up to the combination.

The mechanisms are aimed at forcing partners considering jumping ship to leave money on the table, according to law firm partners and recruiters. They make hiring a lateral partner even more expensive, as hiring firms are expected to make up the difference in money left behind in addition to a competitive raise.

But they also come with some risk for firms implementing the protective moves.

Nixon Peabody in 2020 was sued by former partners challenging the firm’s clawback policy. Lawyers representing the ex-partners argued in court the restrictions implemented by Nixon Peabody limit client choices. The parties agreed to resolve the dispute in arbitration, court records filed in New York State Supreme Court show.