Partner Pay: Open vs. Closed Compensation Systems

Businessman ogling money over another's shoulderBoth have advantages.

By Marc Rosenberg
Partner Comp: Art & Science

“If people are concerned about their absolute level of compensation, then they can be satisfied. However, if their focus is on relative standing, then they can never be satisfied.”

Andrew Grove, former chairman, Intel

An open compensation system is one in which all partners know the earnings of all partners.

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A closed system is one in which a limited number of partners are privy to this information. In closed systems, the only partners with access to all partners’ income are usually the managing partner, the compensation committee and/or the executive committee.