Allen & Overy opts against changes to German lockstep after consultation
Magic circle firm mooted changes to its Germany lockstep last year
May 04, 2017 at 12:02 PM
3 minute read
Allen & Overy (A&O) has ruled out changes to its German lockstep that could have seen remuneration for most of the firm's local partners capped at a reduced level.
The firm kicked off consultations last September about potentially changing its lockstep in the country, mooting the introduction of an informal 40-point top of lockstep, preventing most Germany partners from progressing to the 50-point global cap.
According to former partners, the 'soft cap' was one option considered by the firm, as well as Germany-specific gateways, as part of a bid to raise the profitability of its German arm.
However, the firm has now decided against making any changes in the country.
One source familiar with the matter said that under the proposals, partners would have undergone a series of tests based on both "financial matrix and soft factors" in order to progress.
A former A&O partner said the firm first looked at a German equity management two years ago, and began mooting specific overhauls around six months ago.
He added: "The firm said: 'If we want to maintain profitability we can no longer maintain the system up to 50 points.' Germany partners can still go up to 50 but the firm said it doesn't really fit with what they contribute financially."
In a statement, A&O said: "In Germany we regularly monitor the performance in the lockstep system, but there are no changes to the ladder at this time."
Currently A&O's lockstep runs from 12 points to 50 points, with each lawyer moving up by two points each year. The firm introduced a bonus pool for star performers in 2014 and broke lockstep to hire a number of finance partners in New York last year.
A&O is not alone in putting German partners under scrutiny. In late 2015, Legal Week reported that Freshfields Bruckhaus Deringer was cracking down on partner performance in Germany as part of a global drive to boost firmwide profitability, with partners in the country set to see their profit share reduced as they were moved to a lower ladder.
Earlier this year, it emerged that Clifford Chance Germany partners were among those facing cuts to the lockstep plateau in a number of the firm's offices around the world.
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