A recent post mentioned that some firms engineer their published PPP to appear higher than it is in reality. Does anyone have a general sense of how much of a discount should be applied to the published PPP to understand that actual average equity partner take-home pay? I appreciate that there is likely significant variability across firms. I’m just interested in a general sense of how this works.

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Engineer it how? Excluding partners with some sliver of equity from the PPEP calc? Idk what the definition of “equity partner” is for PPEP purposes, but I’m not sure how you inflate that number other than saying you have fewer people with an equity stake than you do.

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Comp is more related comp structure than PPEP. Yes, super rich firms generally pay a lot more, but it's not that straightforward. Plenty of PPEP rich firms will pay a specialist peanuts (probably won't even give them equity) while others will pay up, so it's really quite nuanced. Some firms also play around with shares and size of the bonus pool to better compensate rainamakers. Actually, there are plenty PPEP poor firms that pay incredibly well on a formulaic system where you get a solid base but do incredibly well if you hit conservative targets.

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There are many ways to "game" PPEP, but the easiest way is to just have less equity partners by metrics amlaw tracks. What people don't seem to realize if you don't actually need to change how you compensate or anything else, you just need to change things to affect how amlaw calculates it. Some overt ways it's been gamed is when O'Melveny said they offered to pay partners a fixed draw,which would make them NEP but likely not change much. Also, a couple of years ago Norton Rose "boosted" PPEP by 40% by literally proclaiming they "misclassified" something like 140 equity partners (by amlaw standards), meanwhile they are actually a single-tiered partnership. PPEP is relevant but it actually doesn't mean that much for 90% of partners.

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yeag

There are also firms that game PPeP to be lower than reality.

Client optics and to ensure there is padding to make sure the number keeps trending up from year to year (going up 15% and then flat next year optically worse than going up 10% then 5%).

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Thanks, all. Appreciate the enlightening responses.

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