Reed Smith has ringfenced a portion of its cash reserves against partner distributions as a means to mitigate the impact of the unfolding Covid-19 crisis.
The new contingency measures will include every office at the firm, with global managing partner Sandy Thomas (pictured) informing the firm’s global partnership in a conference call last week. Monthly drawings will be reduced by 40% for full equity partners and 15% for fixed share partners.
The measures are set to last for five months for equity partners and three months for fixed share partners. Despite belt-tightening at the most senior level, associates will still receive their bonuses as originally planned.
Regarding the measures, a spokesperson said: ‘Reed Smith is performing on plan through the first three months of 2020. Many of our practices are exceptionally busy right now. At the same time, we know businesses around the world are bracing for the short-term and potential long-term economic impacts of Covid-19, and we are taking a fiscally conservative yet responsible approach. Our leadership is taking a cautious approach and has made the decision to slow partner cash distributions in the near term as a precaution. We think this is a prudent choice as we look ahead to uncertainty in global events.’
Meanwhile, Linklaters has confirmed that it is currently considering whether to delay or reduce quarterly profit distribution. The firm has said it is only considering measures at this stage but should it go ahead, it will be the first of the City elite to make such a move, with more mitigation measures expected in the coming weeks.
Pinsent Masons is another firm thought to be considering a reduction in partner cash distributions. The firm’s senior partner, Richard Foley, said following yesterday’s (30 March) announcement of the firm’s latest promotion round: ‘Ordinarily around this time of year, we make a quarterly distribution to our partners. Whether we will do so, and if so, in what amount will depend upon how events unfold over the coming days and weeks.’
The full extent of the business impact on legal remains to be seen. Listed firms have been among those to feel the crisis more acutely, with Knights recently making pay cuts and warning of redundancies.
