Legal Business Blogs

Addleshaws abandons ‘bottleneck’ reforms restricting senior exits amid all-equity partnership shake-up

Addleshaw Goddard‘s leadership has floated a major shake-up of its partnership terms and governance structure in what promises to be a sensitive process as the firm holds merger talks with Maclay Murray & Spens.

The changes have been floated as part of a proposed shake-up of Addleshaws’ partnership agreement, including moving to a single equity structure. Addleshaws currently has 96 equity partners and 77 on salaried status. The consultations, made up of groups of partners, have been led by the firm’s managing partner John Joyce and general counsel Simon Callander across the 670-lawyer firm’s UK offices over the last five weeks.

There are also a number of proposals apparently designed to strengthen the role and responsibilities of the managing partner. Partners are being asked to decide if responsibilities should be delegated from the partnership giving the managing partner clearer accountability and authority for the running of the business and if Addleshaws’ board should function in a supervisory check-and-balance mode.

The shake-up discusses reducing the scope of the senior partner role, including whether the role is full or part time, the title of the role and if the appointment of Monica Burch’s successor in spring 2016 will be internal or external. Joyce is said to favour an external appointment.

A vote on any proposed amendments to the firm’s partnership terms would come ahead of a partnership vote on Addleshaws’ merger with Maclays.

The scope and terms of the shake-up are bound to be controversial amid concerns that Addleshaws’ leadership is attempting to railroad the partnership.

According to one partner, tensions have been heightened by the emergence of the Maclays discussions, which the partnership was only informed of on Tuesday afternoon (24 November), when Joyce sent an email. The partner commented: ‘Management want to look everyone in the eye and sell this as cosy cosy “we are protecting the business” but it is not about that. They are trying to lock people in.’

However, the firm indicated today that it is not pursuing proposed ‘bottleneck’ provisions on the number of partners that can quit in any one year. Legal Business understands that the number of equity partner resignations in a financial year is currently limited to seven, but had been floated as low as three. Proposals had initially also included handing the firm powers to reduce earnings of departing equity partners while enforcing a 12-month notice period, in what would be regarded as hard-line measures to ward off departures and predatory recruitment.

Despite several of Addleshaws’ peers agreeing major Scots tie-ups in recent years, such a union would be opposed by those who argue that the firm needs to focus on its City and international practices.

An Addleshaws spokesperson said the discussions were part of a ‘debate and conversation with a view to the exec returning with a more formal set of proposals’.

Joyce added in a statement: ‘The current partner consultation reflects a more open and inclusive approach which encourages the partnership to come together and openly discuss the business. Our articles have served their purpose well, but they are now very old and would benefit from a modernisation and refresh and we have been consulting partners on how we do that, before returning with a more formal set of proposals which mirror the “commercial” bargain we currently have between partners – ie not fundamentally changing the commercial terms between the partners, but updates them in areas where they seem to be inappropriate in the modern world.

‘It is something the new leadership team has had on its agenda. We know that some elements will not change either because they were not seen to be an issue or are fit for purpose. For example, the notice period for all partners was not discussed at all in the meetings and so will stay as it is, and we have no plans either to reduce the number of partners permitted to resign in any one year.’