Ince partners will also be subject to a 12-month lock-in.
By Krishnan Nair | November 09, 2018 at 10:26 AM
Ince & Co’s partners will move to a ‘black box’ pay system when its merger with Gordon Dadds goes live later this year, in a move away from the firm’s current lockstep transparency.
Ince – which currently operates a managed lockstep with a bonus pool to reward top billers – last month reached a deal to be acquired by AIM-listed firm Gordon Dadds, with the combination set to complete by 31 December.
The acquisition – which will create Ince Gordon Dadds – will see Ince partners adopt Gordon Dadds’ merit-based ‘black box’ pay system, whereby remuneration is kept secret and partners do not know what each other is paid.
This approach to partner pay is relatively uncommon at major law firms, although notable proponents include US firm Jones Day.
In 2016 Ince moved to a managed lockstep system, with partners awarded base pay on a 10-step lockstep ranging from £140,000 to £240,000. The rest of the firm’s profit is distributed between partners based on performance, with decisions made by a remuneration committee.
Gordon Dadds, meanwhile, operates an ‘eat what you kill’ pay model, with the bulk of partner pay determined by lawyer and client performance.
One former Ince partner suggests the black box measure, while “controversial”, is “necessary to stop people being unduly competitive and to avoid squabbles” given the performance-based model.
The ex-partner continues: “There was no need not to be transparent under lockstep, as everyone knows what the other is getting paid. But this will be a shock to the system. It’s a huge culture change [for Ince partners] and could signal internal conflict and unhappiness. But you’re trying to eliminate that with the black box, to avoid controversies.”
Another former partner believes the new system can avoid partner animosity, so long as it does not stray too far from what they describe as the ‘rule of thirds’.
“Most partners in law firms operate using the rule of thirds – for whatever you bring in, a third is for yourself, a third goes to the firm, and the final third is left to cover expenses and other costs. And so long as what happens behind the black box at least roughly mirrors this, it should keep the altercations to a minimum.”
Ince partners will also be subject to an effective 12-month lock-in at the combined firm, followed by a potential six-month notice period. Legal Week understands that those leaving within this timeframe risk forgoing part or all of their share options and capital entitlements, which Gordon Dadds is providing as consideration for its acquisition of Ince.
One ex-partner said the 12-month lock-in was expected and that, for Ince partners who are already subject to a 12-month notice period, it will “come as no surprise”.
Ince and Gordon Dadds declined to comment.