A sinking feeling...

I read "The Lawyer" today and was hugely depressed by a story about CMS Cameron McKenna. I quote the section that gave me a particularly sinking feeling:

The quarterly associate time recording (ATR) bonus was still paid as usual to associates who recorded 400 billable hours in the last quarter. However, an additional performance-linked bonus available to senior support staff has not been paid.

What is being rewarded here? Associates are being rewarded for running up the clock while senior support staff are effectively told that, no matter how well they do their job (and we have to hope that the performance measures used will be (a) sensible; and (b) linked to longer term things like profitability and good staff management), they will receive no bonus.

To summarise: don't worry if you are doing good, profitable work so long as you are cranking in the hours.

Oh dear.

Context: Bhopal

I started to write a post about the Royal Bank of Scotland and the prospect of a fight between the Board and the Government with regard to bonus payments. Two things stopped me. The first was that Peninsulawyer had already written a better post that I was going to (here). The second, however, was the anniversary of a man-made disaster - the Union Carbide plant at Bhopal. The BBC have a good summary of the story here - I've used their graphic below.

It's a dreadful story of corporate incompetence and lack of care which led to the deaths of a huge number of innocent locals. The contrast in the numbers associated with this event are staggering. Seven thousand dead; over six hundred thousand affected. What is worse, however, is the number associated with the "pay off" from Union Carbide - $470 million. It sounds like a lot of money, doesn't it. I suspect that's the point. Divide it amongst the families of 7,000 victims and 600,000 other affected people, however, and it is insignificant.

Imagine this disaster happening to a town on the outskirts of London. Firstly, of course, the chances of a rather wild chemical plant being sited near to wealthy people is not high - Union Carbide didn't choose Bhopal because it was handy, after all. Let's get past that point and imagine that a chemical plant near London suffers the same sort of problem - i.e. incompetence, poor management and an almost total disregard for the safety of people living nearby. Can you imagine a payment of only $470 million? No - of course not. Can you imagine  that no-one would ever be prosecuted for the disaster? No - of course not. There would be massive payments, and a fund established for future problems. Western lawyers working for rich insurance companies would not led anyone off with a "full and final" settlement in 1989, when the effects are still being felt in Bhopal. It is a scandal that there are - statements from the Indian Government notwithstanding - still health problems in the area. It is a scandal that there has never been a criminal prosecution.

In this context, the idea that some bankers might be paid a lot of money rather pales into insignificance for me. Perhaps they will read the news and donate half (say) to the families still living in Bhopal? No, probably not...

Spent it Now!

Having just blogged about not panicing (see my last post), I'm back on my favourite theme - that of short-termism in the industry. What is it about partners and those running law firms that makes them focus so much on this month, this quarter and, in we're lucky, this year - while seeming to ignore next year and the longer term?

Look at this news story from "The Lawyer" entiled "Lovells partners in line for post-merger windfall". The  story explains that with the merger of Lovells and Hogan & Hartson, partners will be eligible for performance based bonuses. Lovells were in the same publication last week in connection with half year results - where they were predicting flat results. Now that is better than most firms at the moment - but is it the sort of results that should merit additional bonus payments.

More importantly (because I think the move to a meritocratic system is a good one, all things considered), I can't find any information about the proposed merger that talks about investment in the new business. There seems to be lots of news about the benefits to the partners - but none about the benefit to the firm itself. In fact I couldn't find any news about the merger on Lovell's web site at all. Hogan & Hartson's did carry a news item (see here) which does seek to show benefits for clients - although these are mostly along the lines of "we'll be bigger and bigger is better - right?".

I would be really impressed if the firms had made an announcement that any additional bonus payments would be based on longer term objectives and measurements (sounds like the suggestions for bankers, doesn't it?), or if the news talked about investment for the future. Instead the news (and I acknowledge that "The Lawyer" is looking for a good story rather than anything else) is all about short term, personal, benefits.

Isn't this one of the issues that helped cause the recession?

To Bonus Or Not, That Is The Question

It must be that time of year again. Following on from my comments in my last blog, and from an excellent posting by Peninsulawyer (see here for the post in question - I do recommend that you read it), there is a prominent news item today in 'The Lawyer" in connection with a bonus payment from Slaughter & May to  its staff (not, apparently, its partners). The web site reports that S&M will be paying fee earners a bonus in the amount of 5% of earnings while support staff will get 2.5%. 

The last lines of the reports state that the firm made an estimated £504m in the 08/09 financial year (yet again promoting an obsession with turnover - but that's a completely different rant) with average PEP thought to be about £2.25m. The suggestion is that S&M have had a bumper year and are being a little mean. "Roll on Friday" goes further. In a story marked "Exclusive" (which must be some sort of new meaning of the word since the story is in general circulation), RoF reports the "Some of the firm's lawyers are pretty hacked off... its associates are all flat to the boards".

I never thought that I would be an apologist for Slaughter and May, but I think that the firm might be displaying a little good sense here and that reports are choosing to ignore a few important facts.

• As "Roll on Friday" does acknowledge that "...the firm didn't make any redundancies" - an important thing to note in the context of most other firms chopping posts with rather gay abandon.
• A 5% bonus in a difficult economy is still pretty good - over £4,500 for a 3PQE lawyer
• The firm is acknowledging support staff with a 2.5% bonus - perhaps less than they would like, but it's still a bonus payment.
• Yes, S&M have announced a pay freeze for 2010 - but how many clients do you think would be happy to read about their lawyers profiting excessively in difficult times?

In my opinion, Slaughters seem to be trying to walk a narrow line between acknowledging the hard work of the staff, while remaining prudent with their cash - i.e. investing the future.

The sort of short-term thinking that sees a good 6 months and demands immediate bonuses is exactly the sort of thing that helped the economy into a mess. In an ideal world all bonus payments would be linked to productivity (both personal and firm) over a medium term period of time and would not simply look at a few good months or deals.

I think Slaughter & May staff should consider that they may be some of the lucky ones this year - they are in a sold firm, provisions seem to be in place for future investment and development, and they are getting a bonus when many lawyers in other firms will not.