I’m not quite sure who Ted Burke thinks he’s kidding. Freshfields’ spin on its financials is cute, but not terribly convincing.
Burke, the firm’s chief executive, was remarkably quick to stress last week that Freshfields’ stellar revenue performance was partly attributable to foreign exchange rates rather than enormous bills to clients.
This is less to do with magic circle self-deprecation and a whole lot more to do with Freshfields’ nervousness about how it might look to its clients. Some Freshfields partners were so concerned about being perceived as fat cats that they even argued they should delay reporting the financials until the autumn in order to avoid public opprobrium.
As it is, the firm’s results slot rather well into recent reports that the City bonus culture is back - not all of Freshfields’ clients will disapprove of its partners making an average of £1.44m.
Still, as we reported earlier this year (26 January), the battle between Linklaters and Freshfields is what has shaped the magic circle since 2003. Their revenues now are virtually identical, and while Freshfields’ £1.44m PEP just pips Linklaters’ average of £1.3m, the latter’s figure is particularly impressive given that it booked all of its restructuring costs this year.
By the way, it’s worth reiterating (amid the usual hysteria surrounding PEP) that yes, of course it’s a huge amount of money in absolute terms, but such differentials matter to employees too. Strategic decisions are taken on the back of these results. If partner profits dip, firms tend to restructure.
Meanwhile, what of the firm that used to shape the magic circle? Clifford Chance had its poorest year since 2004-05. Back in January we reported (12 January) that managing partner David Childs was conditioning partners for a major PEP drop.
A figure of £733,000 is hardly penury, but Clifford Chance will be watching Allen & Overy very carefully. If it manages anything over £900,000, then the chagrin at Clifford Chance will be untrammelled.
The problem for Clifford Chance is that so much of its brand has been caught up with being the biggest law firm in the world. That USP is now gone.
Clifford Chance finds itself in the unusual - and uncomfortable - position of playing catch-up.