The other partners get greedy. Partner salaries don't necessarily stay the same over time, even if they appear to be equitable when a new partner enters
the picture. When the principal partner, or several more senior partners, in a practice face unexpected financial obligations
or investment plan disappointments, they may feel the need to do whatever it takes to come up with more money.
One way to generate more bottom-line revenue is to control expenses, and that might mean no raises for minority partners.
This puts the minority partners in a tough spot. When the majority ownership votes to freeze or lower a minority partner's
salary, he can object and he can complain. But what he can't do is muster enough voting power to change the decision.
And while an associate veterinarian can quit, a minority partner probably can't—he needs to stay to protect his buy-in investment
as well as the viability of his profit distribution from the partnership. For him it's a losing situation. For the majority
partner or controlling partners, it's a real win. For every dollar saved in the minority partner's reduced salary, the majority
ownership receives—well, the majority: 51 cents or more, depending on how much of the practice they own.
The opportunistic sellout. Imagine this scenario: An older veterinarian sells 25 percent of his practice to a long-term associate. The following year
he decides to sell out to a corporate veterinary chain. The 75 percent owner has the power to sell his shares at half of their
fair market value and take the balance in deferred salary for a phantom "consulting" position.
The big corporation then tells the 25 percent partner it wants her shares at the same valuation. If the minority shareholder
won't sell out at the same bargain-basement price, the new corporate owner can effectively force her hand by threatening to
defer profit distributions on her ownership indefinitely or slash her salary.
Business is business
This is the same sort of chicanery you'll enjoy watching unfold on The Good Wife. But don't be confused into thinking that these minority partnership woes happen only in medium-sized law firms on TV. Handicapped
minority shareholders are—and always have been—a reality of life in business. And veterinary practice is a business.
Truth is, when it comes to the risks that go along with a junior position in a professional practice, size really doesn't
matter. Majority owners—or even cadres of other like-minded minority owners—can take advantage of a minority partner no matter
how big or small the group practice might be.
Still not convinced that the fantasy world of The Good Wife mirrors real life? Consider this drama: On May 28, 2012, the venerable white-shoe New York law firm of Dewey and LeBoeuf
filed for bankruptcy after its senior equity partners expanded the firm to 26 offices across the globe and accumulated a staff
of 1,400 attorneys.
According to The New York Times and The Wall Street Journal, senior partners had not only leveraged the firm into excessive debt, but they also set up a salary and bonus structure that
provided luxurious payouts to a small number of senior partners and a far smaller compensation arrangement for all of the
other minority partners. Of course, those junior partners had paid handsomely for the right to buy in through years of toil
as associates and large financial capital contributions.
In a recent interview, William Henderson, JD, a law professor at Indiana University, discussed how this could happen at such
a prestigious firm: "Because the partnership lacks any shared cultural values ... money became the core value holding the
firm together," he said. "Money is a weak glue."
Dr. Christopher Allen is president of the Associates in Veterinary Law PC, which provides legal and consulting services to
veterinarians. Call (607) 754-1510 or email firstname.lastname@example.org