Spotlight on path to partnership
The path to partnership, and associate issues generally, were high on the agendas of many firms late last year, but none more so than Allen & Overy (A&O). Managing partner David Morley and HR head Genevieve Tennant unveiled the firm’s plans to reform London associate career progression at a meeting on 21 December at a time when the firm was facing a battle to keep assistants.
As revealed by The Lawyer days earlier (12 December 2005), the magic circle firm plans to introduce the title ‘of counsel’ as an alternative to partnership. The of counsel role, which will be restricted to a small number of candidates, will only be awarded to lawyers with the same PQE as those eligible for partner.
The Morley proposals include the introduction of a new level of managing associate for the equivalent of four, five and six-year UK-qualified PQE. The radical move was an attempt to deal with the mounting unrest among A&O’s assistants, highlighted by an attrition rate of 25 per cent (The Lawyer, 14 November 2005).
A&O is also planning to hold its first-ever London senior associate conference in July next year.
Elsewhere, White & Case overhauled its associate appraisal system in a similar bid to reduce attrition and improve career development. The London executive committee instructed external consultants on the review in a bid “to simplify and add value” to the firm’s annual appraisals process for both associates and support staff.
The review was expected to create clearer definitions of the criteria used for appraisals and to advance its use in career development programmes.
White & Case London is also looking to expand its associate training programmes. The office is currently piloting a course on client pitches and offering senior associates a business development and account management programme.
Pre-Budget report clarifies treatment of WIP
An issue close to many a finance director’s heart reared its head once more as 2005 came to an end. The two-year saga of how professional services practices should account for work in progress (WIP), brought to the fore by the Accounting Standards Boards’ desire to harmonise international accounting methods, appeared to reach a conclusion in December.
Law firms’ biggest fear had been that the additional tax they faced as a consequence of recognising income earlier in their accounts would have to be paid entirely in a single year. These fears appeared to be eased by the Chancellor Gordon Brown. Several months of intense lobbying by firms and tax advisers paid off when, in his pre-Budget statement, Brown trailed a relaxation of the new rules that would allow firms to spread the extra charge over at least three, and as many as six, years.
However, the statement was not a total clarification. The position of partners at firms that have already made an adjustment in their accounts based on the new accounting standards remained unclear. The statement also said that “most businesses” would be entitled to spread the tax charge over three years, without explaining fully what it meant by ‘most’.
One accountant familiar with the legal market said the relief appeared to be targeted at smaller firms.
“It appears that HM Revenue & Customs is taking the line that [the top 100] firms do not fall within the new spreading provisions, as their adjustment predates the revised guidance issued in March 2005. These firms therefore appear to still have a potentially big ‘one-off’ tax hit, probably due for payment in January 2006.”
Senior partners on the move
The end of 2005 saw a flurry of senior management moves across the City. The long-awaited senior partner election at Freshfields Bruckhaus Deringer finally began in mid-December. Guy Morton, Freshfields’ head of financial services, emerged victorious to join German Konstantin Mettenheimer as joint senior partner. The following week the firm’s US managing partner Ted Burke, was as expected, appointed as Freshfields’ new chief executive.
Not to be outdone, Clifford Chance managing partner Peter Cornell fired the starting gun on the race for his successor when he announced his intention not to stand for re-election. Chief operating officer David Childs is currently the favourite, although Paris managing partner Yves Wehrli’s name has also cropped up as a possibility. As Wehrli said: “If a law firm were to have a managing partner from outside the centre, it would be Clifford Chance.”
Outside the magic circle, SJ Berwin‘s next senior partner was confirmed as Jonathan Blake, head of European corporate finance and private equity. Blake will take over in May 2006, replacing senior partner of 13 years David Harrel.
One of the more unusual management moves also took place at the end of the year in the shape of Collyer Bristow‘s Jonathan Fox. He made the rare move from chief executive officer (CEO) of a law firm to CEO of barristers’ set St Philips Chambers. Fox replaced Paul Wilson, who joined Olswang earlier this month (3 January) as head of its Reading office.
The bar: 23 Jan
Regional: 30 Jan
In-house: 6 Feb
Management: 13 Feb