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Bonuses structured as forgivable loans are being used for partner retention

By Debra Cassens Weiss

March 28, 2024, 1:23 pm CDT

Some law firms are using forgivable loans to retain valuable partners and keep newly promoted partners happy.

New York recruiter Alisa Levin, a principal at the Greene-Levin-Snyder Legal Search Group, described two kinds of forgivable loans in an interview with Law.com.

Firms trying to retain a partner may give that person a forgivable loan that has to be returned if the lawyer doesn’t stay for a set time period, Levin told Law.com. In at least one instance, the article says, a BigLaw firm offered forgivable loans to retain partners during merger talks.

Firms also use forgivable loans to address “the challenges of a transition” when a lawyer used to getting money on a regular basis becomes a partner, Levin said.

One benefit of forgivable loans is their “stealth quality,” the article says. Firms generally don’t report such loans in a partner’s compensation schedule. That keeps other partners from seeking a payout.

“When a firm wants to respond to productive partners who are threatening to leave without disturbing the existing compensation system, a forgivable loan, which is generally not disclosed to the whole partnership, is a way of indirectly black-boxing compensation,” said recruiter Matthew Bersani, a founding partner of the Cliff Group, in an interview with Law.com.