As magic circle firms review their remuneration models, is the future of lockstep in question?
What do the discussions at Linklaters, A&O and Clifford Chance mean for the pay system?
June 03, 2015 at 10:28 AM
4 minute read
How far away from pure lockstep can a law firm move while still insisting it is a lockstep firm? That seems to be the question magic circle firms are asking themselves at the moment, as it emerges that all bar Slaughter and May are in the process of tinkering with their partner remuneration systems, or have already done so in the last year or so.
Linklaters used its April partner conference as a sounding board for a forthcoming review of its lockstep model, which according to partners will look at areas including potentially bringing in the flexibility to better reward high-performing junior equity partners.
Details are inevitably sketchy – not least because no formal proposals have been voted on or indeed gone to partners – but the ambition of making it easier to incentivise junior partners outside a rigid lockstep structure sounds very similar to a change quietly ushered in by Allen & Overy (A&O) at the end of last year. This saw the firm introduce a new discretionary bonus points pool, which can be used to reward star partners already at the firm as well as lateral hires coming in.
Clifford Chance (CC) partners, meanwhile, voted to give the firm's management team powers to overhaul its lockstep in April. The potential consequence is understood to be CC making some room in its system by moving some partners at the top of the lockstep down to reward a smaller number of ultra-high performers with the super-point plateaus that the firm had previously not used.
And, while the timing is more vague and the firm has remained tight-lipped on the subject, Freshfields Bruckhaus Deringer's US hiring spree in September last year was widely rumoured to have come about after the firm flexed its pure lockstep to attract stateside talent. Freshfields did the same in Asia in 2012 for a handful of partners in response to some high-profile departures from the firm locally.
The tracks at each firm vary: A&O has the longest lockstep ladder, running from 20 points to 50 over 15 years; Freshfields has a 12-year, 17.5 to 50 point ladder; CC has a three-tier structure with a core lockstep (excluding super points) topping out at 100; and Linklaters' runs from 10 to 25 points over 10 to 12 years.
However, a common theme is emerging that the magic circle may not be so wedded to these systems as they once were, with Slaughters apparently now standing alone in its absolute commitment to the system.
"Lockstep is a lovely thing provided people's performance is roughly the same," says Alan Hodgart at legal consultants Hodgart Associates. "In the real world that's just not the case."
The rise in competition from high-paying US firms in the London market, as well as an increasingly global market with significant differences in profitability across offices, has now forced the magic circle to pay more heed to how they pay partners, according to Hodgart.
"The pressure just hasn't been as great on the magic circle as the lower tiers until recently," he adds. "They realise they need more flexibility. In the past they've managed it by just getting rid of people who are under-performing to keep it clean. But you can't keep doing that, it just undermines morale."
Some partners within the firms though remain convinced of its benefits. "We don't want to think in terms of the individual bringing in work as opposed to the firm as a whole – you lose the collective responsibility of a partnership without lockstep," comments one Linklaters partner.
"As a firm we are firmly in favour of lockstep," agrees another. "It's a big virtue having it. But inevitably there are times when people reassess things and question whether it's the right thing to do or not."
All of which raises the question of who is going to make the biggest break first, and whether the others will follow.
This content has been archived. It is available through our partners, LexisNexis® and Bloomberg Law.
To view this content, please continue to their sites.
Not a Lexis Subscriber?
Subscribe Now
Not a Bloomberg Law Subscriber?
Subscribe Now
NOT FOR REPRINT
© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
You Might Like
View AllTo Thrive in Central and Eastern Europe, Law Firms Need to 'Know the Rules of Game'
7 minute readGOP's Washington Trifecta Could Put Litigation Finance Industry Under Pressure
Trending Stories
- 1Trump Taps Former Fla. Attorney General for AG
- 2Newsom Names Two Judges to Appellate Courts in San Francisco, Orange County
- 3Biden Has Few Ways to Protect His Environmental Legacy, Say Lawyers, Advocates
- 4UN Treaty Enacting Cybercrime Standards Likely to Face Headwinds in US, Other Countries
- 5Clark Hill Acquires L&E Boutique in Mexico City, Adding 5 Lawyers
Who Got The Work
Michael G. Bongiorno, Andrew Scott Dulberg and Elizabeth E. Driscoll from Wilmer Cutler Pickering Hale and Dorr have stepped in to represent Symbotic Inc., an A.I.-enabled technology platform that focuses on increasing supply chain efficiency, and other defendants in a pending shareholder derivative lawsuit. The case, filed Oct. 2 in Massachusetts District Court by the Brown Law Firm on behalf of Stephen Austen, accuses certain officers and directors of misleading investors in regard to Symbotic's potential for margin growth by failing to disclose that the company was not equipped to timely deploy its systems or manage expenses through project delays. The case, assigned to U.S. District Judge Nathaniel M. Gorton, is 1:24-cv-12522, Austen v. Cohen et al.
Who Got The Work
Edmund Polubinski and Marie Killmond of Davis Polk & Wardwell have entered appearances for data platform software development company MongoDB and other defendants in a pending shareholder derivative lawsuit. The action, filed Oct. 7 in New York Southern District Court by the Brown Law Firm, accuses the company's directors and/or officers of falsely expressing confidence in the company’s restructuring of its sales incentive plan and downplaying the severity of decreases in its upfront commitments. The case is 1:24-cv-07594, Roy v. Ittycheria et al.
Who Got The Work
Amy O. Bruchs and Kurt F. Ellison of Michael Best & Friedrich have entered appearances for Epic Systems Corp. in a pending employment discrimination lawsuit. The suit was filed Sept. 7 in Wisconsin Western District Court by Levine Eisberner LLC and Siri & Glimstad on behalf of a project manager who claims that he was wrongfully terminated after applying for a religious exemption to the defendant's COVID-19 vaccine mandate. The case, assigned to U.S. Magistrate Judge Anita Marie Boor, is 3:24-cv-00630, Secker, Nathan v. Epic Systems Corporation.
Who Got The Work
David X. Sullivan, Thomas J. Finn and Gregory A. Hall from McCarter & English have entered appearances for Sunrun Installation Services in a pending civil rights lawsuit. The complaint was filed Sept. 4 in Connecticut District Court by attorney Robert M. Berke on behalf of former employee George Edward Steins, who was arrested and charged with employing an unregistered home improvement salesperson. The complaint alleges that had Sunrun informed the Connecticut Department of Consumer Protection that the plaintiff's employment had ended in 2017 and that he no longer held Sunrun's home improvement contractor license, he would not have been hit with charges, which were dismissed in May 2024. The case, assigned to U.S. District Judge Jeffrey A. Meyer, is 3:24-cv-01423, Steins v. Sunrun, Inc. et al.
Who Got The Work
Greenberg Traurig shareholder Joshua L. Raskin has entered an appearance for boohoo.com UK Ltd. in a pending patent infringement lawsuit. The suit, filed Sept. 3 in Texas Eastern District Court by Rozier Hardt McDonough on behalf of Alto Dynamics, asserts five patents related to an online shopping platform. The case, assigned to U.S. District Judge Rodney Gilstrap, is 2:24-cv-00719, Alto Dynamics, LLC v. boohoo.com UK Limited.
Featured Firms
Law Offices of Gary Martin Hays & Associates, P.C.
(470) 294-1674
Law Offices of Mark E. Salomone
(857) 444-6468
Smith & Hassler
(713) 739-1250