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Five partners appointed to Dewey & LeBoeuf’s new senior management team have agreed to take profit share cuts of up to $3.5m (£2.2m) per year each as the US firm renegotiates its deals with star partners on guarantees.
The members of the so-called office of the chairman have had their earnings capped at $2.5m (£1.6m) per year and have been promised at least some of the remainder in two years’ time, The Lawyer understands.
The five include Steve Davis, restructuring head Martin Bienenstock, corporate co-head Richard Shutran, litigation chief Jeffrey Kessler and Washington DC head Charles Landgraf. The group was introduced last week to replace the sole chairman position occupied by Davis (28 March 2012).
The firm has issued them with promissory notes to receive deferred payments in 2014, with the partners understood to be contracted to deals worth up to $6m (£3.7m) per year each. It is unclear whether they are set to receive the entire balance in two years’ time or whether they will be expected to give up further remuneration.
Sources told The Lawyer that Dewey is currently renegotiating guarantees made to partners who joined the firm on fixed deals before 2011, but that 2011 joiners are currently safe.
A Dewey spokesperson denied this and the claim that the members of the office of the chairman had agreed profit share cuts.
The guarantee renegotiations are said to be based on the firm’s preference not to disenfranchise recent recruits.
The changes are believed to be initiatives of the new management, with London partner Stephen Horvath becoming executive partner last week as Davis stepped down from the chairman role.
It is thought that there were roughly 25 partners on guarantees before 2011, including Bienenstock, who joined from Weil Gotshal & Manges in 2007 (30 November 2011), and a Silicon Valley corporate team led by partner Richard Climan that joined from Cooley Godward Kronish (13 July 2011).
Dewey’s policy of bringing in partners on fixed remuneration deals is cited as a key factor in its current financial difficulties, with the firm understood to be obliged to meet agreements with star partners on guarantees in spite of outside financial obligations.
Non-guarantee partners are understood not to have had access to distributions for at least a year, meaning their profit shares have been limited to monthly drawings.