Linklaters London partners face longer route to the top after lockstep shake-up

Linklaters

All Linklaters partners face a longer route to the top of the equity in London, following lockstep reforms voted through at the firm’s November partnership conference.

The overhaul, ushered in by managing partner Gideon Moore and which will take effect from May 2017, means partners in London will take a minimum of 12 years to reach the top of the lockstep, compared to 10 years under the current system.

London partners will join the new lockstep at 14 points and progress by three points each year, to reach the top of the 50-point equity after 12 years.

This compares with a 10-year lockstep ranging from 10-25 points for London partners in core practice areas such as M&A at present. Those in non-core practices such as real estate are already on a 12-year lockstep, so the change puts all partners on equal footing.

The new lockstep also has a gate in the equity after eight years, intended to further slow progression. At this point, partners will be assessed to see if they are contributing sufficiently to keep climbing the ladder.

The scale of the ladder will vary depending on jurisdiction; for example, in Germany it will take partners at least 13 years to reach a lockstep capped at 45 points. Partners in Germany will also have two gates in the lockstep – one at six years and another at 10 years. It will in rare instances be possible for local partners to move beyond the cap, subject to performance.

The different ladders for each jurisdiction replace the country weightings of the current system, which sees Germany on a 0.9 country factor compared to London.

According to partners inside Linklaters, the primary goal of the reforms was to slow down progression through a top-heavy partnership, with the move intended in the longer term to increase the value of the top of the lockstep.

While partners already at the top of the lockstep will not face an automatic review of their position ahead of the new system coming into place, all partners will see their position reviewed after five years at the top of the lockstep.

This could mean older partners at the top of the equity having their points cut in order to keep the overall profitability of the firm up and make it easier to promote younger partners.

One ex-partner said: “The key issue that Linklaters has is that it is over-equitised, something like 70% of partners in London are at the top of the lockstep.”

Some Linklaters partners have suggested the overhaul is also intended to reduce the need for large partnership restructurings, by slowing the length of time it takes to reach the top and holding partners at gates.

When partners do hit gates, the performance of their wider practice group or office will be looked at to decide how equity points are best allocated.

The bulk of the magic circle have overhauled their lockstep in recent years, with Allen & Overy, Clifford Chance and Freshfields Bruckhaus Deringer all making changes. These efforts have focused on making it easier to reward star partners and therefore stay competitive in markets where there is pressure for talent, such as the US and London, as well as increasing flexibility lower down.

Freshfields, for example, introduced a two-tier lockstep system, with a lower ladder in some jurisdictions. The firm has also been willing to break its lockstep at the top to bring in star partners in New York, Asia and London – something that Linklaters has avoided in its latest overhaul.

A former partner said earlier plans for the lockstep reform were more radical: “The initial proposal was a rework of the entire lockstep,” he said, claiming that these proposals were watered down by a “silent majority” of senior partners.

Another ex-partner argued that as a result, the reforms do not go far enough in keeping Linklaters competitive. “It is an interim, compromise step on the route to something more substantial,” he said, adding: “The problem with all these things is you are either lockstep or you are not. If you are not then pretending that you are is just a farce.”

Linklaters declined to comment.