Breaking the spell

Former footballer Ashley Cole infamously wrote that he nearly crashed his car when told Arsenal wanted to pay him a trifling £55,000 a week. How we guffawed – amused and aghast. But perhaps we should have tried harder to empathise. After all, they say self-esteem is tied up not with how much we earn, but rather how that compares with our peers.

Now consider the plight of the magic circle equity partner. S/he is now contemplating PEP that has almost doubled in seven years to pushing £40,000 a week. To what extent is s/he a menace at the wheel of the Baby Bentley?

I pose that somewhat facetious question after reading a provocative paper on the future of the magic circle by Christopher Saul, former senior partner at Slaughter and May.

Saul reckons the magic circle have problems. While profitability at what he calls the Big Four – Allen & Overy, Clifford Chance, Freshfields and Linklaters – has soared, it ‘pales’ in comparison with US titans such as Davis Polk and Latham & Watkins. (Saul’s ex-firm Slaughters is not an LLP and remains coy about its profitability.)

Worse, the weakness of sterling renders our indigenous elite acutely vulnerable to losing talent to the fast-expanding City arms of the US behemoths.

So, as Saul puts it rather witheringly: ‘How can the magic circle avoid being a training service for the leading US firms, gradually surrendering “brand charisma” in the process?’

Saul raises the prospect of a US merger ‘only to dismiss it’. And though he acknowledges that the Brits have invested heavily in boosting their US presence, this is unlikely to ‘move the dial’. He is also lukewarm about a stockmarket listing, noting that is safer for the ownership and management of a firm to be unified.

Saul’s most intriguing suggestion is that the UK firms could emulate the big accountants by ‘spinning off’ less profitable practice areas or jurisdictional offices. This could increase profitability without compromising their full-service, global proposition.

These are nice problems to have, some might say, when you already earn as much as a Premier League footballer. But the paper has made waves. If Saul, now a governance and strategy consultant, wrote it to put himself in the shop window, he certainly succeeded.