Law firm partnerships can be lofty unions, built on mutual confidence among shareholders who work together and split the rewards.

Or “partner” can be little more than a snazzy title, good for impressing clients and friends, without any actual ownership stake in the firm.

For big U.S. law firms, the latter is increasingly common as the ranks of non-equity or “income” partners -- who are paid a salary rather than sharing directly in firm profits and typically can’t vote on management decisions -- continue to grow.

As Reuters colleague Sara Merken reported, New York-based Cleary Gottlieb Steen & Hamilton last week became the latest firm to join the non-equity trend, which a firm spokesperson in a statement said “underscores our dedication to developing and retaining talent.”

By my count, about 86% of the 100 largest firms by revenue have non-equity partner positions, a sharp change from 30 years ago, when according to the National Association for Law Placement, opens new tab, only 27% of firms with 500 or more lawyers had multiple partnership tiers.

It’s a quiet shift that reflects an evolution in what it takes to be a big law partner, legal consultant Janet Stanton of Adam Smith, Esq., told me, especially “when it comes to bringing in business.”

In decades past, a lawyer might have been promoted to equity partner for being a competent practitioner and “a good guy,” she said (and yes, almost always a guy).

But as top law firms have become big-money enterprises with big profits to match (avidly reported and ranked by the legal press since the first Am Law 50 published, opens new tab in 1985), she said today’s equity partners are called on to marshal and oversee teams, manage client relationships, and most importantly, bring in enough business to cover their own salaries plus those beneath them.

A few years as a non-equity partner provides associates with a runway to learn such skills, Stanton said, while making the lawyers feel valued (who doesn’t love a prestigious new title?) along the way.

There’s also the influence of Kirkland & Ellis. The highest grossing law firm in the U.S., it’s practically the poster child for non-equity partners, with more than 950 of them, or nearly two-thirds of the firm's partnership – but more on that later.

Cleary’s new non-equity tier follows similar switches earlier this year by Paul, Weiss, Rifkind, Wharton & Garrison and Wilmer Cutler Pickering Hale and Dorr.

Paul Weiss chair Brad Karp via email said his firm’s move was “solely for competitive and retention purposes.”

For years, Paul Weiss watched as competitors “lured our talented counsel and associates by offering them non-equity partnership,” Karp said. As a defensive measure, the firm "realized that we needed to offer a non-equity partner title."

Likewise, Wilmer managing partner Anjan Sahni in a statement said that adding an income partner tier “gives us more flexibility” to attract and retain talented lawyers.

According to NALP, non-equity partnerships have been ticking up steadily. In 2001, 47% of firms with 500-plus lawyers utilized two or more tiers, while 66% had adopted the structure by 2009.

Granted, not every firm has embraced non-equity partners.

The leader of one equity-only firm, who asked not to be identified by name in order to speak candidly, said that a non-equity tier “cheapens the brand of being a partner.”

The single-tier partnership structure, he said, helps in recruiting top law students who value an eight-year path to full partnership, versus up to 15 years from associate to non-equity partner to equity partner.

And after the merger of Allen & Overy and Shearman & Sterling was completed in May, the combined firm adopted A&O's equity-only model rather than Shearman's two-track approach, a source familiar with the firm's structure told Reuters.

But other firms see non-equity positions as opening new doors to advancement.

Steptoe chair Gwen Renigar, whose Washington, D.C.-based firm added a non-equity tier in 2019, told me the move came as the firm grew and became more successful. "Expectations for being an equity partner grew with it," she said. “Very few people were promoted,” she said.

In 2018, for example, only three Steptoe associates got the nod, according to a firm press release, opens new tab. (The firm had about 500 lawyers and other professionals at the time.)

The non-equity tier, which is intended as three-to-five year “stepping-stone” rather than a permanent position, gives lawyers time to hone their business development skills, she said. It’s also useful for partners winding down their practices, as they transition to full retirement.

Steptoe currently has about 100 equity partners and 50 income partners.

In addition, non-equity positions can be a good fit for "service partners" who look after the firm's institutional clients but haven't brought in business of their own, said Indiana University Maurer School of Law professor William Henderson, via email.

Plus, non-equity partners can be profitable. While they’re paid more than associates (how much varies quite a bit), they don’t need much training and can bill at higher rates, which makes them “a net positive” for a firm’s bottom line, said Henderson, who studies the legal profession.

To some, that may sound in large part like the secret of Kirkland’s success.

Kirkland chairman Jon Ballis in a recent appearance on “Law, disrupted,” the podcast hosted by Quinn Emanuel Urquhart & Sullivan founding partner John Quinn, discussed his firm’s non-equity partnership tier. (Ballis declined to be interviewed for this column.)

“Not everyone, but certainly many, most” of Kirkland’s senior associates are promoted to income partner after six years, Ballis said on the Aug. 30 broadcast, opens new tab.

These lawyers are eligible to be considered for equity partner after another three years, a timeline on par with equity-only firms, Ballis said. Many who don’t make the cut will “move on,” he said, but he also noted that there’s a set of “career income partners” who remain permanently employed at the firm.

While outsiders often attribute Kirkland’s profitability to its “large, non-equity partnership, that is not true at all,” Ballis said. “It’s not like we have excess profitability because of this, of how we structure our titles.”

If rival firms think copying Kirkland by adding a non-equity tier will be “a sort of silver bullet” for increasing profitability, he added, “they’re going to be sorely disappointed.”