The new managing shareholder of Fort Lauderdale law firm Becker & Poliakoff has made some bold changes since taking over the firm, including moving to larger offices and acquiring two smaller firms, but no decision has been more controversial than the holdback of a portion of equity partners’ salaries. Gary Rosen, who took over the role of the firm’s managing shareholder 18 months ago, stressed that this type of policy is not atypical of large law firms, and is done as a means to stimulate growth at the firm and secure its financial future.
Rosen, a former litigator, spoke with the Daily Business Review about his year and a half as the leader of Becker & Poliakoff, and confirmed that of all of the firm’s recent changes, nothing has been as controversial as a decision to hold back 20 percent of each equity partner’s income. The policy, which withholds a portion of the partner’s income for several months, is used to shore up the firm’s cash flow. Popular at many larger law firms, all money that is held back is typically returned by the end of the fiscal year.
“The standard is partners do not take 100 percent,” said Rosen. “They are owners of the business. It makes sense to have a reserve. This has nothing to do with the economic circumstances of our business,” he added. “We’re fully reserved. Ultimately, I think the partners understood … and recognize it’s a smart way to run a business.”
As a mid-sized firm, Becker & Poliakoff attorneys were not expecting to have their salaries held back. Rosen’s predecessor instituted a 10 percent holdback for all attorneys, and this practice proved incredibly unpopular, and led to several lawyers leaving the firm and a lawsuit. Rosen feels that, as part-owners of the business, equity partners should be able to sacrifice some of their immediate earnings for the sake of the company.
Some of the firm’s equity partners disagree. One partner, speaking with Daily Business Review anonymously, said that it was not so much the holdbacks that are the problem, but how the policy was announced and has been instituted. Sharing the way that the partner learned of the holdbacks in January, the person said, “We received an email out of the blue, not a phone call, not an equity partnership meeting. Who does that?” Another partner said that a recent partner meeting led to a shouting match and tears, and that paychecks were withheld late last year without notice.
Rosen says that the attorneys had been fully briefed on the policy at a meeting, and that so far there have been few problems. The withholding of salary for equity partners will be effectively reduced to only 10 percent in July, and he says that all of the money that has been held so far will be returned to the partners by the end of the year.