It takes some balls to demand $25m (£13m) over five years with no strings attached, particularly if you’re not even a fee-earner. But then Orrick Herrington & Sutcliffe‘s Ralph Baxter never got anywhere by being faint-hearted.
Baxter’s chutzpah has carried his firm through a tumultuous few years, but it was that very self-confidence that created problems in the negotiations with Dewey Ballantine. As we reported last week (8 January), the merger talks collapsed, leaving a messy sprawl all round, with Dewey arguably the worse off. The collapse, say sources close to the situation, was largely attributable to Baxter’s demands rather than the business case. Indeed, merging the two firms was not too difficult on paper; their financials were similar and there was certainly some synergy between their institutional clients.
But their philosophies were so very different. Dewey managing partner Mort Pierce would undoubtedly have been in line for a decent cut on completion of the merger. His remuneration currently hovers around $6m (£3.1m), part of which is a bonus package tied to his transactional work. Unlike Baxter, who is a full-time evangelist, Pierce is a ferocious fee-earner who bills up to 3,000 hours a year. Whether you can truly manage a firm and be its biggest biller at the same time is questionable, but the Dewey-Orrick encounter is a perfect example of the differences in measuring a managing partner’s performance.
The Pierce model is an extreme example of what happens at many US firms, where there is an expectation that those with management responsibilities should continue to fee-earn if possible. And indeed, many UK managing partners also pay lip-service to this – although they soon find out that transactional work is virtually impossible to keep going. In order not to be perceived as an administrative overhead by their partners, UK managing partners feel the pressure of having to achieve something concrete.
Unfortunately lawyers routinely underestimate the contribution of their managing partners unless they are given to the flamboyant gesture. Nigel Knowles is clearly in that mould; nobody would deny his leadership has made a difference at DLA Piper.
This also applies to Tony Angel at Linklaters, who is stepping down as managing partner after eight years in the job. By whatever measure you apply, Angel has transformed Linklaters and, in the process, the way magic circle firms are run. But you could never imagine him asking for $25m.