Fear and loathing at Fladgates

Profits are up and the firm will soon be moving to a plush new Mayfair office, but discontent has been running high.

If you think you have heard this story before - you have. Fladgate Fielder's recent history can be described as "Mishcon de Reya: the sequel".

The firms are of a similar size and profile. Both have acted for members of the Spencer family - Mishcons for Princess Diana, Fladgates for Earl Spencer (it is advising him in all his libel actions). They both operate a merit-based remuneration system for their partners. And they both boast an unhealthy number of disgruntled former employees.

But, if anything, Fladgates' could be the X-rated, uncensored version of the tale - Mishcons, only with a bit more acrimony.

In the past 12 months Fladgates has lost 16 fee earners, half of them partners. That is a quarter of the firm's fee earning staff.

Defectors complain of a "poisonous atmosphere", of "a reign of terror".

One positively sang down the phone from his new firm. "It's so... wonderful here," he gushed with the enthusiasm of an old lag who has been transferred to an open prison.

One former partner told The Lawyer that no one who had left retained any goodwill towards the firm.

When four property partners left for Charles Russell recently, the departures were officially described as "amicable" by both sides.

But a source at Fladgates says head of property Allen Cohen told a departmental meeting shortly afterwards that no one had ever left that the firm was not pleased to see the back of.

Central to the story is Fladgates' chairman Paul Leese. He, like Anthony Julius, a head of litigation, rose to prominence during the bumper years of the last recession. He prides himself on his "strong and efficient" leadership.

So strong, it seems, that nobody disagrees with him.

He says that in the past four years: "I cannot remember a partnership meeting where everything was not voted through unanimously."

Such "concerted leadership" has undoubtably brought rewards. The firm says it had average profits per partner of about £175,000 for 1996/97. The annual turnover is up to about £11m and the corporate department has grown rapidly since Leese became chairman in 1992, from five to seventeen fee earners, including seven partners.

There have been some sizeable catches: head of corporate Nicolas Greenstone arrived from Olswang in 1994; Eamonn Cannon, who had his own firm, joined the property department in 1995; and Anthony Vaughan joined the corporate department from Olswang in 1996.

But former colleagues complain of arrogance and secrecy. One refers privately to Leese as "the little dictator".

Leese says the firm is a "collection of free-thinking individuals", but there are complaints that dissent is met with increased billing targets, reduced remuneration and a chat in a side room along the lines of: "Have you thought about moving on?"

Fladgates, originating in 1760, spent centuries servicing the tax and property needs of the landed gentry but has long seen the need to develop its corporate practice.

In 1988 after failed talks with Davies Arnold Cooper, it eventually merged with West End firm Fielder Le Riche. At least one Fladgates partner left for DAC shortly afterwards and there were reports of acrimony over the profit structure for the new partners. But eventually, the management and pay structure problems were sorted out.

The firm's basic constitutional framework was drawn up by Deloitte & Touche following a consultation in 1986. "Delegated management" involves biennial elections for the head of each of the four departments - corporate, property, tax and litigation - who make up the management board along with two other elected members. The actions of the board are monitored by twice yearly meetings of the full partnership.

The senior partner position, held by Howard Keen, is a figurehead role.

Under the board, management is carried out by "professional managers". Fladgates boasts three full-time human resources staff - a somewhat greater number than many firms of a comparable size - as well as large IT, accounts and marketing departments.

The benefit is obvious - freeing partners to concentrate on law. And, on the face of it, it is very democratic. But dissidents claim that for the past six years the operation of the system has been far from democratic.

In 1992 Leese was elected to the board and was later joined by Greenstone, Cohen, and tax head Andrew McKenzie. They have been in place ever since, and are returned every two years - unanimously, of course.

In 1997 Cannon challenged Cohen for the property board seat. According to sources at the firm, Cannon won by six votes to three only to be told the result was not acceptable to the management board. Cannon withdrew and Cohen was elected unanimously.

Leese says this story is "inaccurate". He says there was a long, "fiercely contested" period of lobbying but only one official vote in which there was only one candidate - Cohen, who was supported by Cannon.

The management board also makes up the remuneration panel. Every two years it considers each partner according to eight criteria, including billings and practice development. The panel has the power to reduce a partner's lock step share by up to 25 per cent.

Leese says shares ranged from £120,000 to £305,000 last year. Other sources say the bottom end was somewhat lower. It is believed that this year the top earners could receive more than £350,000. The full partnership votes through the proposed distribution which needs a 62 per cent majority.

There used to be an appeals committee for disgruntled partners but it was scrapped four years ago. McKenzie explains: "If a partner appealed the committee could only look at them in isolation. It was not always possible for them to see the whole picture. It was better the whole partnership voted the package through as a whole."

Fladgates has a workaholic atmosphere and likes big billers, particularly in the property department.

One former property lawyer says department head Cohen did not like to stop work. Monthly department meetings would be a whistle-stop 40 minutes, with Cohen running through everyone's billings before getting back out there. Partners lunches were often cancelled from on high - there was too much work to do.

Of course, lawyers working hard and making money are more often feted than slated. But for many at Fladgates the atmosphere became choking. Some openly voiced dissent at the partnership meetings.

In the past year John Bates, Lynn Povey, Juliusz Wodzianski, Ian Fisher, Paul Holth and Bryan Dowler have quit as property partners. Assistants John Russell, Mark Jacob, Marcia Stephenson and Karen Fielding have also gone.

In the corporate department partner Philip Barth, and assistants Joanna Gardner, Ildiko Bita, Elizabeth Wilson, Gabriella Wright and Daniel Shier have left.

In the cases of Bates and Russell, who defected to Winchester firm White & Bowker when Fladgates decided to close its Basingstoke office, Fladgates took legal action over an alleged breach of confidence of a client list.

Leese refuses to discuss any of the recent departures. "That's history," he explains.

He points out the number of fee earners is up to 60 from 57 last year and that the string of departures has been compensated by the recent takeover of eight-partner West End firm Kaufman Kramer Shebson.

This is said to have brought £1.5m into the property department, compared with the £1m which is said to have gone the other way when Povey's team departed.

Later this year the firm will move to a plush new Mayfair office - hardly the action of a firm in trouble.

Mishcons has been losing lawyers at regular rate for several years. Is the same thing happening at Fladgates - or has the recent exodus cleared the air?

Leese may be unpopular with some, but like all good dictators, he makes sure the trains run on time.