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Watching U.S., Australian Law Firms Debate Lockstep Salaries
The American Lawyer
October 27, 2009
U.S. firms' debate over whether to keep or abandon lockstep compensation for associates is being closely watched from distant shores. The Australian, Australia's largest newspaper, reports that major firms there are also looking at introducing performance-based pay systems,
"Over time I think you will see movement (in Australia) moving away from lockstep towards greater degrees of performance-based salary-setting," Robert Milliner, the chief executive partner of Mallesons Stephen Jaques, told the newspaper. But he said the speed of the change would likely depend on movement in the international legal community.
Another Australian firm leader, David Fagan of Clayton Utz, said he had just returned from a conference of U.S. managing partners. He described as "perverse" the American system whereby associate salaries could rise for eight years without reference to performance and said several U.S. firms were on the verge of abandoning it. Orrick, Herrington & Sutcliffe and Bingham McCutchen are among those that already have.
Australian associates generally earn much less than their U.S. counterparts. While first-year associates at large firms in New York still typically earn $160,000 a year in base salary, a starting lawyer at big Sydney firm frequently earns a third of that.
Michael Rose, chief executive partner of Allens Arthur Robinson, said the debate about pay was a natural outgrowth of the economic downturn and other structural changes facing legal profession.
"All those things will cause all firms to be thinking about what size their firm is, what practice they focus on and how their business systems are set up to meet that new dynamic," said Rose.
The American Lawyer wrote this month that, particularly in light of their nation's ever-tightening economic relationship with China, major Australian firms are pondering their global role, including possible mergers with U.K. firms.
