Former UBS banker, tired of bonus politics, heading to Linklaters

A former Cravath Swaine & Moore tax partner who left that firm to join UBS as an investment banker four years ago is set for a return to law firm practice.

Citing the increasingly political environment for bankers and their shrinking compensation, Lewis Steinberg is expected to join Linklaters in June as co-head of the firm's US operations and head of the firm's US tax practice. Linklaters announced the hire in a statement released on Tuesday (7 April).

Steinberg, 52, says his move is a sign of the times as bankers, worried about how government intervention and political pressure will affect their compensation, look to move into fields that could offer better and more stable compensation. One of those fields, Steinberg says, is the law.

"Four or five years ago I felt a bank was an environment [in which] I could provide skills in an efficient way for my clients, and, to be frank, be well compensated for it," Steinberg says. "Now it's no longer a friendly environment to do it. And I can actually give my clients better service [at a law firm]... I can be adequately compensated and perhaps better compensated."

The idea that someone potentially could earn more as a partner at Linklaters than at UBS as a top banker would have seemed illogical not long ago.

Yet the times are changing. In November, UBS modified its compensation model for top executives, awarding no bonus in difficult times and adding a claw-back feature. This January, The Wall Street Journal reported that managing directors in the US investment banking division would receive no cash bonuses for 2008 and would instead receive a deferred cash or stock payment. The bank, which has received billions in bailout funds from the Swiss Government, also slashed its bonus pool by 80% to around $1.74bn (£1.24bn).

Linklaters posted profits per equity partner of £1.44m in the fiscal year that ended April 2008, up 11% from the previous year. Still, the firm is feeling recessionary pressures. Billings through the six-month period ending 31 October rose by only 3% to £653m. And in January, Linklaters announced plans to cut 120 lawyers and 150 staff in London.

Nevertheless, as Steinberg sees it, these days law firms like Linklaters are "stable" compared to the banks.

Steinberg isn't alone among leading US lawyers who left for investment banks in boom times only to return to firms during the downturn. Bankruptcy specialist James Sprayregen returned to Kirkland & Ellis in December after two years at Goldman Sachs. "You're going to see people who did make the switch from law to banking coming home," Steinberg says.

Compensation wasn't the only reason for Steinberg's move. Advising clients was becoming increasingly difficult as many clients were distracted by the headlines surrounding UBS and other banks. Law firms, he notes, have a higher degree of privacy and aren't subject to the whims of the stock market.

"I can serve my clients better and get more stability in my own life by using many or all of the skills in a law firm environment," he says.

Before going into banking, Steinberg was a lawyer at Cravath, which he joined in 1984, making partner in 1991. Steinberg rose to prominence among the tax bar, for a time chairing the New York State Bar Association's tax section and serving as a co-head of Cravath's tax practice. Cravath cited his departure when in 2005 it made a rare lateral hire, bringing on tax partner Andrew Needham from Willkie Farr & Gallagher.

While at Cravath, Steinberg had occasion to work with Linklaters tax partners Yash Rupal and Guy Brannen on various deals. Linklaters says it reached out to Steinberg while he was at UBS about a return to law firm practice. Linklaters bears some similarities to Cravath, as its compensation structure is lockstep. But size was what mattered to Steinberg.

"Cravath was an organisation that was very much a stable platform; it was not very interested in growth," Steinberg says. "UBS has been very similar to Linklaters, very much on a growth path until quite recently and it was the excitement of helping grow the US business that was very, very exciting."

Steinberg, who will join the firm in June, says he will focus on strategic growth in the US and business development. Linklaters, which currently employs around 150 lawyers in New York, says it continues to focus on replicating its European market position in the US.

By Nate Raymond in New York.