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Top law firms shun lockstep
The Times Online
28 February 2007
Europe’s top law firms are abandoning the tradition of rewarding partners according to their length of service in favour of merit-based pay, new research reveals.
Just a quarter firms said they allocate partner profits on a pure lockstep - or tenure-based system - with the majority of firms now paying partners either entirely on performance or with a combination of lockstep and performance elements.
The proportion of European firms that maintain a pure lockstep model fell from 42 per cent in 2005 to just 25 per cent this year, according to BDO Stoy Hayward’s professional services practice.
BDO’s research shows that the bulk of firms abandoned lockstep in favour of entirely performance-based rewards with 50 per cent of law firms now sharing partner profits in this way compared to 22 per cent last year.
The proportion of firms adopting a “halfway house” part-lockstep, part-merit system also fell sharply, from 36 per cent in 2005 to just 15 per cent last year.
The changes move European firms closer into line with their US rivals and are designed, according to BDO, to boost firm profits.
“Recruitment and retention of the best talent remains the priority, with most firms appearing to support efforts to attract these individuals by rewarding them for their contribution rather than their loyalty,” the report said.
BDO also acknowledged that firms may be turning their backs on lockstep because of fears that rewarding people based on length of service rather than performance could fall foul of age discrimination laws.
Employment lawyers have warned that disgruntled junior lawyers who see older colleagues being paid more regardless of how much work they do may try and bring age discrimination claims.
The combination of a continued surge in mergers and acquisitions activity and a sharp increase in the ratio of lawyers to partners boosted average profits at European firms by 15 per cent last year.
The survey also found that male lawyers continue to dominate Europe’s top firms with 85 per cent of partnership positions held by men, up from 84 per cent last year.
Clive Howard, an employment partner at Russell Jones & Walker, said: ''This is good news for one of the most exclusive old boys' network around. And it is unambiguously an old boys' network, with the proportion of male partners at 85 per cent."
"The figures also confirm that leverage is increasing, so more lawyers are excluded from the holy grail of partnership. The real issue is not how impressive the profits may be but how narrowly and unfairly they are shared.''
BDO carried out its research in conjunction with Lexis-Nexis and the European Lawyer magazine.