Addleshaws weighs up move towards all-equity partnership

National firm considers dropping fixed-share model in overhaul

Addleshaw Goddard is looking to overhaul its partnership structure, with the firm taking its first steps towards going all-equity.

The national firm is considering phasing out its 74-strong fixed-share partner rank in preference of an all-equity partnership model - a move that could be in place as early as May next year.

Management set up a six-member committee to lead the consultations earlier this month, with findings set to be presented to the board by Christmas. If the firm decides to go ahead, the changes should be implemented by the beginning of the next financial year.

The top 20 law firm said having all 173 partners on the same structure would better align the partnership's interests.

The plans come as growing numbers of firms take steps to cut equity partner/fee earner leverage in response to the downturn. Addleshaws would achieve immediate cost benefits by cutting its rank of fixed-share partners, some of whom earn more than those at the bottom of the lockstep.

In 2008-09 the top of the equity stood at £554,000 and the bottom at £214,000, while fixed share partners can receive up to around £250,000.

The committee will now look at how best to implement the overhaul. This could include altering the value of equity points or extending the boundaries of the lockstep ladder, which currently runs from 50 to 150 points. It also needs to consider how much capital fixed-share partners should inject to join the equity.

Addleshaws managing partner Paul Devitt said: "We see that there are some real benefits to a single equity partnership - with all aligned in a way that there is no difference in short, medium and long-term partner interests - so it is sufficiently interesting to look at seriously."

However, one partner warned: "You have to ask, why would a fixed-share partner want to give up their status as some people could get a pay cut? They will expect capital to be paid in, so it is effectively a pay cut which you have to pay for."

In January, Addleshaws asked 19 partners to leave while others were de-equitised and some fixed-share partners demoted to non-partner status.

Other firms looking at reducing salaried or fixed-share partner ranks include Link-laters, which has been shifting towards an all-equity partnership in recent years, and LG, which wants its salaried partners to become fixed-share.

Addleshaw Goddard on the Legal Week Wiki