On the morning of Sunday 18 December 2005, Clifford Chance managing partner Peter Cornell sent out his regular weekly update to the partnership. The Cornell email – a weekend homily pitched somewhere between a private meditation and performance script – has become a regular means of communication between management and the partners.
But this one – considerably shorter than usual – was more momentous than most. “I’ve decided not to stand for re-election,” Cornell declared. “I’ve thought long and hard about it. I’ve been in the role for close to five years and the firm has gone a long way.”
Cornell went on to extol the partners’ decision on Friday 16 December to vote for reform to the compensation system and finished on an upbeat note. “I can’t take any credit for the improvement in the economy,” he said, “but we’re in better shape.”
Cornell had already announced his decision at Clifford Chance’s monthly management committee meeting in London that Friday, just hours after the result of the vote on lockstep. Sources say that few at the meeting were in any way surprised.
But before the Clifford Chance revisionists (and they are legion) get to work, Cornell has actually left a redoubtable legacy. To start with, he has paved the way for current chief operating officer (COO) David Childs to take over.
Cornell’s nod to Childs in his resignation email – “Under Childs’ leadership the cost base is lower… we have a more conservative balance sheet” – was seen by many recipients as significant. Childs, appointed two years ago, has been viewed by most of his partners as the de facto boss for the past two years, particularly since Cornell moved to New York in January 2005.
Cornell’s legacy is not just Childs. Clifford Chance is genuinely a happier place than it was when he took over. Following the post-merger period, when the management was perceived as arrogant and aloof, Cornell has been a humanising influence.
What is more, he has made the death of lockstep seem entirely acceptable to a partnership that not only revolted back in 2001 against any form of performance assessment, but which also rejected the last set of compensation structure reforms in October 2003.
The man who was elected nearly five years ago to “give the partnership back to the partners”, as he put it, has done a pretty good job of delivering up the partnership to central management.
Not a details man
“Criticism? It bounces off me pretty much,” says Cornell bluntly.
This is not quite the whole story. Rarely has a managing partner been so aware of his approval ratings. After four years in the job, Cornell still seems most comfortable talking about the intangibles. If anything, he seems a natural senior partner rather than a managing partner. Not for him the sliderule approach to cost per lawyer and profit margin; rather, he prefers to talk about whether the partnership is… well… happy.
Speaking to The Lawyer just a few days after his announcement, Cornell sounds almost relieved. “I felt I’d achieved a lot of the principal objectives,” he says. “I felt Clifford Chance was gathering some momentum and was on an upward curve. I always felt that, if we were able to do that, it would be a sensible time for me to go, especially having got the vote through and the US settled. It seemed to have a certain logic.
“Many people have been very supportive and have said to me that they feel more communicated with and consulted,” he adds.
Paris managing partner Yves Wehrli agrees. “Pete’s always been good on people skills, and people like that,” he says.
This is not something that has necessarily endeared Cornell to the hawks. But even they concede that he has had the sort of calming presence that the cantankerous Clifford Chance partnership needed.
“In a one-on-one situation he’s very good,” says one partner. “He doesn’t get into details. He usually finds something of interest to you and you’ll feel good about having the conversation. Pete’s style is to absorb other people’s views and not to indicate a view of his own.”
Cornell almost seems to acknowledge this when he talks about the firm’s year-long process to change the partner remuneration structure. He told his partners at their spring Paris retreat that the lockstep had to be flexed. Bruisingly, Cornell had already lost one vote on lockstep reform in 2003, when a group led by Childs attempted a shake-up of the superpoint system, a legacy of the merger with Rogers & Wells.
“We should have spent more time explaining to the firm the importance of the vote that was lost,” admits Cornell. “We should have done more on a management level to persuade people. My next year after that was dealing with the fallout from that vote. We really underestimated the time it would take to integrate the Americas.”
So when it came to the 2005 review, he says, the importance of what he dubbed ‘soak time’ was paramount. “I said to Cliff McAuley’s group, ‘Consult this one to death’,” he says.
As a result, Clifford Chance partners have been persuaded into saying yes to a set of proposals that establish the principle of different equity ladders for different jurisdictions, but which tie all partners to a three-year appraisal cycle which could result in their being paused on the ladder or moved down by up to three points. Partners can then be put on a watch list and reviewed every year.
Not much of a lockstep, then. As one insider trenchantly notes: “The management were always worried about turkeys voting for Christmas. So they had to dress Christmas up as Easter.”
But Cornell does not see this as sleight of hand by the management. ‘I don’t think I’ve done it by stealth,” he protests. “It’s an honest attempt to look at the issues in a global context and make an assessment of what’s right for the firm.”
If Cornell had decided to stay on, he might have risked frustrating his key ally: Childs. (A comment in the Financial Times which said Cornell would be regarded as a shoo-in for managing partner next time round raised eyebrows in London, a Childs stronghold.)
It was Cornell’s deft decision in the autumn of 2003 to make Childs his COO that was the first step to the firm’s recovery. Since then, Childs has taken £40m of costs out of the business, dumped the controversial $150m (£85.6m) private placement, centralised all procurement decisions and overseen an entirely new practice management system.
The fact that profit per unit is projected to hit £8,500 – equating to £850,000 for plateau partners compared with last year’s £710,000 – is almost universally credited to Childs.
Insiders talk of tension between them, although Childs defends Cornell’s contribution. “There were some tough times during Pete’s office and he did a good job for the firm guiding us through them,” says Childs, who otherwise maintains a strict silence on the subject of management.
Cornell’s move to the US at the beginning of 2005 was symbolic to many. As far as most London partners are concerned, Cornell has simply taken himself out of play. He seems tacitly to acknowledge the fact that he has been increasingly isolated from day-to-day management.
“There’s an element of that,” Cornell admits. “But David and the finance guys are very good at getting on with their stuff. [Interim finance director] William Barnes and [finance director] Stephen Purse coming in has worked well, and David has kept a good grip on it. Because of that team I never really felt out of touch.”
Meanwhile, Cornell says he has spent his year in New York smoothing feathers. The US has been a headache of epic proportions for Clifford Chance; a little patch of ground that has no profit but the name, as it were. There was the superpointer fudge to contend with, plus the exodus of former Rogers & Wells rainmakers such as Jim Benedict, Kevin Arquit and Steve Newborn. Even more spectacularly, the California experiment went badly wrong.
Two years after Clifford Chance’s triumphant raid on Brobeck in the summer of 2002, it abruptly closed on the West Coast. Cornell, who has magically escaped being tarred with the failure of that venture, nevertheless defends it in retrospect. “Strategically it was a sensible move,” he argues. “The fact is we had the balls to go for it. It was just mispriced. When it came to repricing, we were right to do what we did.”
Cornell may have defended the US business from too much carping at the spring 2005 partnership conference, but he made his thoughts clear when he called for utilisation rates – then running at 85 per cent in the US – to hit the firmwide average of 95 per cent.
Cornell’s intervention at a time when the US was making barely £4,000 profit per unit compared with the firm’s then-average of £7,100 may have allowed the issues to be aired without too many recriminations. It was important not to repeat what happened at the partnership conference two years previously, when Tower Snow had come in for much personal invective from angry London partners.
“We need to grow the US,” argues Cornell. “We have a tax group that’s highly profitable but too small, and M&A, litigation and real estate all need to grow.”
Cornell has traded much on his personal charm over the past four years. To be fair, he had to: he inherited a terrible situation. Overt hostility between the legacy firms on one hand, and between line partners and management on the other, culminated in the most fractious partnership conference in living memory at Hammersmith in 2001, where the partners’ mistrust of the then-management team of Keith Clark and Michael Bray spilled over into outright hostility.
“I suppose with all that mistrust it was a bit messy and ugly,” says Cornell. “I felt I could rebuild that trust and settle the place down.”
In 2002, Clifford Chance senior Italian partners, led by Vittorio Grimaldi, staged a revolt. “The question for us was, were they going to continue as their office and run on their terms with anxiety on the part of junior people, or should it become a Clifford Chance office?’ recalls Cornell. The senior people left to set up on their own.
“There was a short-term hit in terms of revenue, but now we have a Clifford Chance office full of people doing work the Clifford Chance way,” he says. “I felt I had to take a decision and stick with it.”
But at a time when the firm was at its lowest ebb, Cornell – for all his apparent unease with a spreadsheet – was the right person in the job.
The associates’ memo – dubbed ‘Paddinggate’ – was a particularly difficult moment. The memo, which was leaked onto the internet in October 2002, exposed US associates’ morale as rock bottom. Even more damagingly, it said that pressure to bill could have led to a situation where bills were being padded. There has never been any suggestion that this was actually happening, but the mere mention of it got the world’s business press salivating.
Arthur Andersen had collapsed just a few months previously, and The Lawyer has spoken to a series of partners who candidly say that many felt they were facing something similar. Most admit that Cornell was admirably calm under extreme pressure.
“I appreciated very early that we had to take this seriously,” confesses Cornell. “It didn’t matter that it wasn’t a real story: this had legs and could do the firm a lot of damage. We had to close it down.”
Words to the wise
Cornell has these words of advice for his successor. “I’d encourage them to extend their network down to the junior partners, even the associates,” he says. “Pick on the big things to focus on. Delegate well. Be consistent. Don’t bullshit. You get knocked about a bit in this job. You need very thick skin to deal with it.”
A thick skin indeed: the speculation about his successor has already begun in this most political of firms. After the touchy-feely Cornell years, Clifford Chance partners have already got back their taste for red meat.