aerospace in Italy
...ompensation system. Pricing and billing · Usually à hourly billing rate for worked lawyer time; · Exceptions à criminal litigation (fixed fee up front) and others (see pag. 4); Compensation System Before 1989 Managing committee decided how much each partner was to receive yearly (seniority accounted the greatest proportion); In 1989 MC gives guidelines to EC (and CC). The system was as follows. Step 1 Each year the CC collected data on individual partners (see 11 points for main quantitative items – pag. 4 -, and other information like, age, billing rate, etc. – see top pag. 5 -). Step 2 EC interview each partner to discuss the achievements. Step 3 CC met to decide upon the “points”. [CC circulated guidelines: ü reasoned judgment as the contribution made by the partner to the firm success; ü increase (decrease) of points are not right, but to be discretionally awards of the CC; ü “stability” income was desirable (no yo-yo effect); ü “smooth” adjustment over a period of time] [Firms attempted to establish some “norms”: ü new partner à 10 pts; ü first 4 years of partnership à 1 or 2 pts/y (sum: 14 or 16); ü next 6 years of partnership à 2 or 3 pts/y (sum: 26 or 36); ü over 10 years of partnership à at the discretion of the CC] [In 1994 total pts was 1000 à partner with 50 pts (5% of 1000) “wins” $609,000 for FY 1993] Step 4 Partnership awards listed in a memo and distributed (with statistics) to all partners for approval by voting. Were voted unanimously (private discussion in recent years). Events in 1994 Two new member in the EC and CC. Before the election many parties appear: “ old guard” vs ‘new guard”, “business getters” vs “ good citizens”, interdepartmental rivalries. Newly elected candidates were young litigators. When the pts were announced, EC receive many protests and during the partners meeting, they accept the committee’s recommendations, but subject to thorough review and report back to the partnership of the basis for pts awards for 1995 and beyond. Study questions: 1.What are the issues raised by the case concerning the criteria and tradeoffs involved in setting partner compensation? (see 9 points à pag. 9) 2.Assume that the eight partners described in Exhibit 2 are a typical cross-section of the partnership in terms of performance, skills, and backgrounds. Also assume, therefore, that 8/37ths of the firm's partners' compensation pool sh...