Freshfields faces partner tension as more than 60 see profit share reduced
Multiple partners see profit share drop by around £300,000 in latest lockstep restructuring
June 01, 2018 at 08:18 AM
3 minute read
Freshfields Bruckhaus Deringer is facing tension within its partnership after more than 60 partners saw their profit share reduced when the firm ushered in its new lockstep system this month.
The firm agreed a substantive overhaul of its lockstep in November last year, which meant all of the firm's roughly 400 partners saw their position on the ladder assessed ahead of the new system coming into effect from 1 May.
Former partners suggest that more than 60 partners, many of whom were previously at the top of the lockstep, were asked to "voluntarily reposition" themselves through moves that effectively reduced their profit share.
The new lockstep, designed to help retain star performers and allow the firm to expand in the US, runs from 12 to 60 points, with gates at 22, 30 and 40, compared with the previous ladder, which ran from 17.5 points to 50 points.
Former partners suggest some have been asked to move from the top of the old lockstep down to 30 points, which means that even allowing for a significant increase in the value per point to about £58,000, their profit share has dropped from about £2m to £1.7m.
One ex-partner commented: "In the first instance, partners had the opportunity to voluntarily reposition. This brought a lot of noise into the firm as people were asked to reposition. The atmosphere in the firm is not brilliant right now. The cuts affect people everywhere and they are not based in one region or specific to a practice area."
Another ex-partner said: "They have asked people originally on 50 points to move to the new 30-gate level. This is the first round from the 'Gates' committee. My understanding is that relatively few are above 30 and that 30 is seen as the new normal in order to achieve greater profitability."
In January, Legal Week reported that between six and eight partners were set to be appointed to the 'Gates' committee, which oversees decisions made by practice heads and regional heads about partners' progress through the firm's new lockstep.
Those asked to move down are spread across all practice areas and geographies.
One Germany-based partner at a rival firm said: "I heard that no one volunteered to throw units into the basket and were pushed. They wanted to see voluntary steps but this didn't happen."
Another former partner commented: "People are leaving because of the restructuring. It is no surprise that people did not voluntarily agree to points reductions, so they are using some not-so-subtle force."
It is not the first time that Freshfields has docked partners' profit share. In 2016, the firm took advantage of a lower lockstep ladder available under the previous system. Multiple partners began moving down to the second tier across offices including London, New York and Germany.
Separately, Freshfields today (1 June) announced the hire of a quartet of London patent litigation lawyers from US firm Arnold & Porter. The team, which is led by partner Christopher Stothers, also includes counsel Laura Whiting and two associates.
Freshfields declined to comment.
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