In a world that favours pay-for-performance, bonuses dangled by general counsel for firms that achieve an especially desirable outcome are in vogue. A bonus can be attached to a single matter, such as the outcome of a major acquisition or lawsuit, or to a group of matters, such as all-lease negotiations for a 12-month period. Awarding a bonus can be subjective, objective or a mixture. A bonus can come on top of standard fees charged or be the restoration of some or all of the fees held back during the matter. For example, a law firm might agree to discount its hourly rate in return for a bonus if a good verdict or settlement is reached.
Yet bonuses can create difficulties. Time constraints at the start may make it difficult to figure out an effective bonus. It takes time to work out arrangements such as bonuses. Even when both sides are amenable to a novel payment structure, time passes while the concepts are articulated, hashed out, reviewed and refined.
