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Faced with seemingly endless turmoil in the United States, Clifford Chance is attempting to right its ship with some worldwide deck swabbing. Since its 2000 merger with New York’s Rogers & Wells, the London-based firm has lost more than 30 partners in the U.S.

Faced with seemingly endless turmoil in the United States, Clifford Chance is attempting to right its ship with some worldwide deck swabbing. Since its 2000 merger with New York’s Rogers & Wells, the London-based firm has lost more than 30 partners in the U.S., including such standouts as Kevin Arquit, Kenneth Gallo and, most recently, James Benedict.

Most left because of tension over Clifford Chance’s lockstep compensation system, which limits flexibility to reward overachievers. This year, aiming to improve its profitability and stop desirable partners from leaving, the world’s largest law firm has been conducting more rigorous partner reviews. Clifford Chance won’t say it’s pruning deadwood; instead, managing partner Peter Cornell explains that the firm is reinforcing its standards: “We must have an obsession with quality. It must be nonnegotiable.”

But will anything short of a radical attitude readjustment be enough?

Before the merger, the firms knew they’d have to resolve two different compensation systems: Clifford Chance’s lockstep, and Rogers & Wells’ model that rewarded business generation. With neither side willing to give up its system right away, they cobbled together a short-term compromise that allowed a handful of stars in New York and Washington, D.C., to be paid above the top lockstep rate.

For the U.S. lawyers, there was another key element to the deal. To assure American partners that a lockstep-dominated system would be fair, the British firm agreed to conduct “rigorous” partner reviews and enforce an “intolerant” lockstep. (These conditions were stated in the merger agreement.) That, theoretically, would weed out underperforming partners or drop them down the scale. “It was a way to come up with a common set of expectations,” says one former partner. “Do we aspire to be the worldwide equivalent of Sullivan & Cromwell, or not? … You can’t bill 1,500 hours and say you want to be Sullivan & Cromwell.”

Management underestimated the resistance it would face from old-line partners in London, where the culture is not as driven by the bottom line. Cornell, who took over as managing partner in 2002, confirms that these reviews didn’t happen. “We tried and failed about three years ago to introduce a partner assessment procedure,” he says.

The firm’s failure to impose high expectations on all partners led to frustration in the United States. For the firm’s last full fiscal year, which ended April 30, a partner at the top of Clifford Chance’s lockstep made less than $1 million. The firm ranked 40th in profitability on The American Lawyer Global 100 list. One problem is that most partners rise to the top lockstep level after nine years. As a result, nearly half of Clifford Chance’s partners sit at the top rung, diluting the profits at that level. (The firm has also recently been reminded that it’s vulnerable to poaching abroad. In November, Paris corporate partner Dominique Bompoint was lured to Sullivan & Cromwell.)

Cornell says that to succeed in the United States and globally, Clifford Chance needs to improve its profitability. The firm has been cutting costs, but also is focusing on getting partners to generate more revenue. For the current fiscal year, the firm has targeted an increase in profits of 25 percent, which would raise the top lockstep rate to $1.25 million. This would at least elevate it to the level of the most lucrative British firms.

Cornell says the partner reviews have been focused on quality, with billable commitments secondary. Does the process aim to weed out underperformers? “Not really,” Cornell responds. “That’s an issue that has to be dealt with, but [the reviews] are not actually related to that. It’s more focused on whether [partners’] personal goals are aligned with what the group is doing.”

The reviews didn’t appease at least one New York partner. In late October, Clifford Chance suffered arguably its most significant loss in the states when New York partner Benedict left for Milbank, Tweed, Hadley & McCloy. Benedict, a 55-year-old litigator, was not just a tireless worker with a huge book of business. He had led the firm’s management team in the United States and had been a visible booster for the merger.

Benedict, who started his career at Rogers & Wells 30 years ago, bluntly stated his reasons for leaving. “The British playbook doesn’t work [in the United States], or at least it needs to be modified,” he says, referring to lockstep. “I think that any change to lockstep is a huge threat to a big part of Clifford Chance.”

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