Partnership votes to raise compensation levels two years after last shake-up
In its most recent bid to compete with high-paying US rivals, Clifford Chance (CC) last month voted through another round of changes to its remuneration structure, two years after last introducing more flexibility to its system.
A partnership-wide vote handed the firm’s management a mandate to raise compensation levels again, which could see a select few being put on 150 points, or 130 points and a bonus.
This hike is greater than the 115/130 points previously available for top earners and is 50% above its current core City plateau. The points range initially sat between 40 and 100 points before 2015, with a discretionary gate at 70 points aimed primarily at the Magic Circle firm’s European offices.
While it is unclear if plateau earnings in major foreign offices are affected by the latest shake-up, one CC partner said high achievers in Europe could now earn between 80 and 100 points.
‘I’m not sure CC has the established procedures and acceptance among its partners to do this.’
However, a partner at a rival City firm said: ‘People have known for a while that CC needed to change its compensation structure to reward star performers. The two questions are whether that is enough and how much internal anxiety this will cause within the partnership. These changes won’t reward the top performers sufficiently to compete with the US firms. Any time you change a compensation system, it causes a lot of internal anxiety, as there are always winners and losers. I suspect you will see more people leave the firm.’
One City management partner concurred: ‘I’m not sure CC has the established procedures and acceptance among its partners to do this. To me it looks like fiddling around the edges. Simply introducing flexibility in [an] otherwise rigid system isn’t really going to solve anything.’
The 2015 remuneration shake-up at CC was designed to raise profit-per-point from around £13,000 to an ultimate target of £20,000, by removing points from circulation while increasing the scope to pay top performers. The move was aimed at protecting the firm from being targeted by high-paying US rivals.
According to several partners, CC has so far been slow to award top points, though a substantial number of partners have already been moved down the lockstep in foreign offices.
Some City partners believe that the latest shake-up is related to the widening gap in partner remuneration between City firms and their US rivals investing heavily in the City, and the Brexit vote, which has sent sterling plunging.
The partner at a rival firm added: ‘If you look at other places which successfully introduced flexibility, they’ve usually done so on a wholesale manner, not just in small bits. It’s also important to have the buy-in of your fellow partners, which it doesn’t seem like CC does.’ CC declined to comment on the changes.
georgiana.tudor@legalease.co.uk