Latest proposed changes by Magic Circle firm after recent overhaul of governance structure
Having taken the summer to vote through a substantive overhaul of its governance structure, the autumn agenda of Clifford Chance (CC) will see the partnership consider whether the firm should move to an all-equity model.
The Magic Circle firm currently deploys a single profit pool, lockstep system and partners spend three years as juniors before progressing onto the equity, which ranges between 40 and 100 units.
With the firm viewed by many as historically slow at implementing structural change, the proposition of all-equity made by managing partner Matthew Layton as part of his election manifesto is to some a welcome move.
One partner says: ‘All-equity partnerships make the most sense but, as a general proposition, we should all be equally subject to seniority on the lockstep. The partnership welcome this. There’s nuances on it but the general consensus is that all-equity is probably better.’
Layton, however, has yet to commit to solid plans and told Legal Business: ‘We should always consider the options. I can see some advantages to it – equally there are some benefits in having non-equity partners. I have [also] made proposals to the partnership to consult and look at the current governance structure. We need to be in the right shape for our clients as the market changes; we must be flexible and adaptable to change.’
‘We should always consider the options. I can see some advantages to it.’
Matthew Layton, Clifford Chance
The firm, which this year revealed its highest ever financial results to date with revenue up 7% to £1.36bn, has overhauled major parts of its constitution of late, including streamlining its corporate governance structure in late July. Another feature of Layton’s manifesto, the firm voted in a 12-strong executive leadership group and the creation of three global business units to cover financial markets; M&A and corporate transactions; and risk management and disputes.
A challenge in going all-equity would be coming up with packages to retain star partners.
One ex-partner concludes: ‘My issue, during the financial crisis when profitability was affected, was that partners, particularly junior level partners, saw a big drop in income and it didn’t leave a lot of flexibility for the firm to iron out. One of the things that would stop people from leaving would be to have some sort of contingency so that an erratic year in profitability could be smoothed out. CC is brave to be looking at these things.’
sarah.downey@legalease.co.uk