#34 The Legal Profession This Week - Cravath Modifies Its Scale and Kirkland Shortens Its Partnership Track​


By BK​

Cravath Modifies Its Scale?

Pure lockstep remuneration, infamously dubbed as the “Cravath Scale”, has recently been dealt a crushing blow. After 50 years of the pure lockstep compensation model, Cravath, Swaine & Moore has recently announced its plans to reform its pay structure to adopt a modified lockstep system at partnership level (Law.com).

There are very few “pure” lockstep US firms left, two notable examples are Wachtell, Lipton, Rosen & Katz and Debevoise & Plimpton.

Last year, Davis Polk & Wardwell made headlines when it tweaked its lockstep formula. In an interview with Bloomberg Law, Davis Polk’s managing partner Neil Barr said: “Our existing compensation structure, which paid partners solely on the basis of seniority, was simply not compatible with our strategic designs going forward.”

In a current market facing greater competition than ever before, lockstep firms are facing increasing pressure to take measures to retain their top “earners” - as their non-lockstep rivals are able to take advantage of their flexible remuneration structures to “woo” top earning partners with huge financial incentives. Some may say Cravath’s move to a modified lockstep partnership may indicate that pure lockstep firms are “losing favour in the war for top talent.” (Law.com)

Kirkland Shortens its Partnership Track

Last Wednesday, Kirkland & Ellis announced that it is shortening the length of its partnership track from ten to nine years. Within the backdrop of an escalating pay war for talent and a lengthening average partnership track, Kirkland’s shortened partnership track is predicted to make headways in the legal industry.

Firstly, it may give current non-equity partners and laterals “an earlier shot at equity in a firm that boasts more than $6 million in profits per equity partner". (Law.com). Secondly, it arguably pushes more substantive or high-profile work to associates who wish to work towards equity partnership level within nine years.

While the impact of Kirkland’s decision is yet to be seen, it is clear that money talks. Kirkland has seen a successful year in the lateral market, hiring many top partners from other leading law firms with large signing bonuses.

‘Business as usual’ – the notable deals and cases which went ahead this week:

Taylor Wessing and Slaughter and May are advising on Abrdn’s £1.49bn acquisition of online investment service Interactive Investor. Taylor Wessing is advising Abrdn, whereas Slaughter and May is advising JC Flowers & Co (the majority shareholder of Interative Investor).

CMS has won the mandate to advise Blue Prism, a British software company specialising in robotic process automation, who was the “subject of a takeover bidding war between SS&C Technologies and Vista Equity Partners". (The Lawyer). Davis Polk & Wardwell is advising SS&C’s winning bid, whereas Kirkland & Ellis and Simpson Thacher & Bartlett have previously worked on Vista’s bid.