So far the wave of redundancies that have rippled through the UK legal profession has not been replicated across the Atlantic but that may be about to change with news on Monday (24 June) that Weil Gotshal & Manges is to cut around 170 staff.
The New York-based law firm announced the move internally in a package of cuts expected to impact on 60 associates, around 7% of its non-partner lawyer ranks, and 110 support staff, citing what it described as the ‘new normal’ of low growth.
In addition, Weil is to cut the compensation for some partners and the firm said it would be ‘de-emphasising’ its complex commercial litigation practice in Houston and Boston.
The cuts are expected to primarily impact on Weil’s US practice rather than its network of foreign offices, which include London, Hong Kong, Frankfurt and Paris.
The package of measures was announced to staff in an email from executive partner Barry Wolf (pictured), who said the tailing off of work related to the 2008 banking crisis combined with low levels of transactional activity had forced the 1,200-lawyer firm’s hand. Weil, traditionally regarded as New York’s top bankruptcy practice, previously avoided making substantive job cuts in 2009 when many peers cut staffing in the wake of the collapse of Lehman Brothers.
The firm will also look at partner remuneration. Wolf stated: ‘There will have to be meaningful compensation adjustments for certain partners in light of the economic realities of the new normal. It may well be that some of these partners will decide to pursue other opportunities.’
Wolf was at pains to emphasise the firm’s solid financial position, with zero debt and a fully funded partner pension plan with over $500m of assets in it. The firm does not have any compensation guarantees with partners other than for the first year a lateral partner joins the firm.
In the email, which has been seen by Legal Business, Wolf states: ‘We are taking these actions from a position of strength. At the same time, from a revenue perspective we will continue to take significant steps to further increase our market share. However, it appears that the market for premium legal services is continuing to shrink. Therefore, actions to enhance revenue alone will not be sufficient to position the firm as necessary for these new market conditions.
‘While we have been able to avoid these actions in the past, and it is very painful from a human perspective, the management committee believes these actions are essential now to enable our firm to continue to excel and retain its historic profitability in the new normal.’
It remains to be seen whether key Manhattan peers will follow Weil’s lead. Powered by the relative strength of the domestic economy and a revival in contentious work, leading US law firms have generally performed better over the last two years than rivals in Europe, despite a handful of high profile collapses like Dewey & LeBoeuf and Howrey. Weil saw flat revenues in 2012, posting income of $1.29bn, while profits per equity partner edged down to $2.22m.
By caroline.hill@legalease.co.uk