Comment: Squaring the lockstep circle
CC returns to payment battlefield once again
October 13, 2004 at 08:03 PM
3 minute read
If at first you don't succeed, then try, try and try again. That is the philosophy being doggedly pursued by Clifford Chance's (CC's) management as it attempts to bring the firm's partnership pay structure up to date.
Ironically, given CC's status as the most global UK law firm, it actually has the least flexible lockstep system of all the big four international giants. Even Freshfields Bruckhaus Deringer, the most psychologically wedded to the lockstep of the big four, modified its system in order to accommodate its German merger partner, Bruckhaus Westrick Heller Loeber.
Although it makes liberal use of salaried partners, CC has a single global lockstep for all of its equity partners with the exception of that ever dwindling handful of US super-pointers. The system is the legacy of a different era – before the explosion of international growth that occurred in the late 1990s. When it merged with Rogers & Wells in the US and Grimaldi e Associati in Italy, the firm shied away from a fundamental review of its pay structure and instead opted to tinker with it by allowing for a limited number of above plateau partners in those two jurisdictions. Last year the wider partnership was given the opportunity to deliver its verdict on this system when it voted on a proposal to continue with the super-pointer system in the US. They failed to back it in sufficient numbers, much to the chagrin of the firm's US partners, many of whom have since left the firm.
This latest review, revealed by Legal Week on 7 October, promises a fundamental overhaul of the firm's lockstep with the mooted introduction of a country or regional weighting system, to reflect the different profitability of the jurisdictions the firm operates in. It is hardly revolutionary stuff, and, unlike the last plan, promises the support of the London partners, who would stand to benefit.
Much will depend on the degree to which the firm's management can deliver on its promise of securing a dramatic increase in profitability this year. Profit distribution within a struggling firm is always more contentious than it is in a firm that is doing well.
Indeed, if the firm does have a strong year, it might even find itself in the unfamiliar position of being able to have a rational debate about what is a pretty fundamental issue, not least because of its vital bearing on the firm's US ambitions..
After all, it is one thing for a London-headquartered firm to distribute a smaller slice of profits to partners operating in less profitable jurisdictions. But it would be a different matter for the London partners to sanction a system that weighted the points of all of its New York-based partners upwards. Then again, the UK giants insist they are serious about cracking New York – all the while proclaiming the virtues of the lockstep. Something has to give.
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