With the Magic Circle facing increasing pressure from US firms’ ability to pay top dollar for star talent, Allen & Overy (A&O) has introduced a performance-related bonus pool, separate to its lockstep, both to help retain and bring in leading talent.
While the firm confirmed there is no set criteria determining what will see existing partners receive the bonus, factors like the number of billed hours and winning new clients will be considered. The firm’s overall lockstep remains unaltered and will continue to run from 20 points, up two points each year, to a maximum of 50.
The move comes after senior partner David Morley appointed a committee last year focusing on how to award partners for ‘outstanding performance’ in a bid to retain its star performers and attract lateral hires. The committee is chaired by global managing partner Wim Dejonghe and consists of a small number of senior partners from different practice lines.
In terms of rewarding lateral hires with the bonus, the sponsoring partner will put a proposal to the committee which will then decide whether or not to award the lateral with extra points. This remains subject to a full partnership vote when bringing in any lateral hire.
The revised proposal of the new bonus pool was first put to the firm’s partnership ahead of its partners’ conference in February 2014. It was subsequently voted through by 90% of the partnership in July last year and put into effect from 1 December.
A spokesperson at the firm said: ‘The lockstep now allows for a discretionary points pool to assist in attracting and retaining truly exceptional partners and lateral hires. We continue to operate a single global profit pool. The underlying lock step system remain the basis for the vast majority of partner compensation. This evolution reflected the partnership’s desire to maintain the lockstep while providing the flexibility the business needs to remain competitive and grow our global market share.’
The news comes as Magic Circle firms are reviewing their remuneration models to compete with the hefty pay packages at rival US outfits. Last month, Legal Business revealed Clifford Chance voted through proposed changes to its remuneration system which will see the firm deploy a more flexible lockstep by stretching the top of the ladder in a bid to retain star partners.