Eversheds set to sanction full profit sharing between offices

Eversheds is poised to end years of wrangling by finally agreeing to full profit sharing between its regional offices.

The changes are expected to include a move away from the current local lockstep system to a more merit-based scheme.

The firm currently has a national profit sharing scheme where offices contribute a small percentage of their profits into a national pool.

The money is then distributed to regional operations dependent on a range of criteria, including bringing in clients and contribution to training.

Three years ago partners signed a convergence agreement which stated that Eversheds would have 100 per cent national profit sharing by 2000.

But the firm has been plagued with concerns about profitability dilution if smaller, less profitable offices contribute to and take 100 per cent profits from the same pool as stalwart offices such as Leeds and London.

A source close to the firm says the convergence agreement “led to some tension in the partnership”.

“It is one of the reasons why there was some fall-out but the three years is now up.”

The move will require a change to the partnership agreement, which has a clause on profit sharing and will therefore need a majority vote from the partners.

Chairman Keith James confirms partners are in the process of working out the details of full profit sharing and acceptance is expected by 1 May.

He says: “A review is under way to make sure the profit sharing scheme reflects our development plans.

“From the consultation we have had so far, I think there is an acceptance that we need to review and adapt our current scheme. Support from the partners is certainly there.”

The firm has appointed a working party consisting of lawyers from across the country and of a varied age range to carry out the review.

Details which need to be resolved include whether the firm would use a lockstep system or not.

A source close to the firm claims the local distribution of profits is done on a lockstep basis but believes Eversheds will want to move towards a more merit-based system.

It is unlikely the profit centre will be extended to offices outside the UK for the moment – the firm has operations across Europe, including Moscow and Brussels.

Two years ago, Eversheds' management committee attempted unsuccessfully to merge the profit centre (The Lawyer, 20 January 1998).

But a source with strong links to Eversheds confirms the partners will be voting in favour of this review.

One commentator says: “If you are going to call yourself a national firm then this is something you have to do.”

Eversheds has 337 partners spread across 12 locations throughout the UK.