Of all the "evergreen" topics we keep coming back to here at "Adam
Smith, Esq." one of the ever-greenest (no pun…) is the eternal disequilibrium
between lockstep and eat-what-you-kill partner compensation models. Most
recently, I addressed it here.
The tension, in a nutshell, is to find a way to encourage
the laudable—but very different!—behavior patterns each
rewards while safeguarding against the (again, different) antisocial
repercussions that both can lead to. More specifically:
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Lockstep
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EWYK
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Good at:
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Bad at:
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Latest to weigh in on this, decisively against lockstep, is the FT. While
recognizing that
"[l]ockstep has its advantages," and that "a lockstep firm’s lawyers
are more likely to work seamlessly. They will be less tempted to
structure deals to reward one set of specialists or the partners of
one office," they neverthless opine flatly: "global
law firms can no longer afford that luxury."
What’s the problem? Retaining talent:
"A gap has opened between profits per equity partner
[of UK firms] and those of top New York firms such as Wachtell
Lipton Rosen & Katz
and Sullivan & Cromwell. Figures from The Lawyer magazine show
US firms taking nine of the 10 top places on this measure this year,
with only Slaughter & May sneaking in beside them.
That allows New York firms to poach lawyers in the world’s financial centres:
even in London, the City firms are losing partners."
Their conclusion?
"The City ought not to stick to lockstep
like the band that played on as the Titanic sunk: quaint, selfless
and admirable, but doomed."
Now, as they say in debate class, would anyone care to argue the negative? Sure!
The FT article is premised on the assumption that compensation
is the primary, if not the only, consideration partners attend to when
choosing allegiance to a firm. Perhaps surprisingly, given
my faith in homo economicus, I beg to differ.
First, the inevitable caveat: Magic Circle and Bulge Bracket
partners have bills to pay along with the rest of us, and the new BMW,
diamond bauble, or ski weekend are always beckoning. And certainly
the opportunity to double or even triple one’s take-home is something
neither you nor your spouse will be willing to ignore. As
well paid as many are, demand can always outrun supply.
That said, there is genuine intangible value in a sense of collegiality
in the workplace, in team-building, in delivering top-notch client
service untainted by self-interest, in contributing to an institution—"The
Firm"—over an extended period of one’s career, and not least
in avoiding the infighting, neck-biting, and generally deplorable "Lord
of the Flies" behavior associated with arguing over such nasty details
as origination credits.
Moreover, my experience has long been that if a partner (or an associate,
for that matter) leaves for another firm, it’s never for that 15-20%
pay bump; it’s always really about something else. (The pay increment
is an OK reason, and it may be the "public" reason, but it’s rarely
the decisive reason.)
I continue, until the facts change, to come down in the camp of "modified
lockstep," with due recognition for superstars, but not
outsized recognition. At the late and largely unlamented Finley-Kumble
(which collapsed in a cash crisis Christmas Eve 1987, unable to pay
holiday bonuses), the ratio of highest to lowest paid partner was 17:1. As
Fran Musselman, the eminent senior partner at Milbank who became trustee
of the estate in bankruptcy of Finley-Kumble, put it: "There
is no way on earth that those two people were partners."
So I recommend strongly against unalloyed eat-what-you-kill; the partnership
you save could be your own.
I read the FT’s article with interest. However, the writer omitted a change that’s coming down the line that will irrevocably alter if not destroy lockstep, namely, age discrimination law. UK law will rule this out in 2006. Lockstep essentially rewards age (or cohorts which are age related groups). Age discrimination law will not permit rewards based on age unless a very strong case can be made for it. On this we will have to wait and see until somebody challenges lockstep in the courts.
My feeling is that lockstep — and how many other occupations use it? — is a holdover from the days when partnerships were small. It wasn’t until 1969 that UK law permitted partnerships of more than 20 partners. But if a firm has over 1000 lawyers with several hundred partners, is collegiality really possible or likely? I doubt it. Hence lockstep is out of line with present cultures.
I do agree with you that a modified lockstep might suffice, as Clifford Chance had to do when it took over Rogers & Wells. But the R&W partners have been leaving in droves as the days of superpoints were being counted down.
Yet big changes are afoot in the British legal profession as the government aims to liberalize the organization of lawyers. It would like supermarkets to offer legal services, for example. In a globalized world with the prospect of MDPs, I don’t think lockstep will survive much longer.