Corrs looks to be ushering in a remuneration model …[like] the largest US law firms, in which the [bosses] make exorbitant salaries.
Controversy surrounds law firm CEO’s $63 million payday
Around 120 partners in Australian law firm Corrs Chambers Westgarth will be asked to make history this week by approving a pay package for the firm’s managing partner and chief executive Gavin MacLaren, granting him a staggering yearly salary upwards of $7 million for the next nineh years.
However, against this backdrop many of them are unaware of a letter sent by a member or members of the firm in January to the Human Rights Commission that raises concerns about broader governance and cultural issues at the company.
“Our concerns include … the accountability of Gavin MacLaren, who is the CEO”, the letter states.
MacLaren’s pay deal, if locked in by a vote of partners on Wednesday, could be even greater than the aggregate of $63 million if certain performance escalators are triggered.
And there appears to be no notice clause, which means MacLaren would be set for the next nine years. Under the deal, if he doesn’t perform and Corrs wants to get rid of him, he gets paid out his full package until 2033.
The firm said on Monday it was not aware of a complaint made to the Human Rights Commission.
“No individual nor the Human Rights Commission has notified Corrs of such a complaint,” a spokesman said.
This masthead is not suggesting MacLaren has not complied with any legal obligations, only that a complaint has been made to the Commission.
The prospect of locking in this remuneration deal has resulted in a rift within the firm, with some partners uncomfortable with the size of the package and the governance structure around it.
The level of pay is well out of sync with even the top-tier law firms, whose most senior partners earn around half as much, or the big consulting firms like PwC and Deloitte, where the chief executive salary haul sits closer to $3 million.
It would also be well in excess of the median base pay of the chief executives of Australia’s largest 100 listed companies of around $1.7 million. As a comparison, mining giant BHP boss Mike Henry’s base pay is $1.8 million.
Corrs looks to be ushering in a remuneration model for its Australian lawyers that is more akin to some of the largest US law firms, in which the rainmakers can make exorbitant salaries larger than those in profligate investment banking firms.
An email to its partners last week about the hastily convened meeting to vote on MacLaren’s package reportedly said he had overseen an 86 per cent jump in revenue since joining in 2018, forecast to reach $511 million this financial year. Profit had increased 124 per cent to $220 million.
A Corrs spokesman said on Monday that “since Gavin joined Corrs, the firm’s cumulative revenue increase above trend has been more than $700 million, and the cumulative profit increase above trend has been more than $400 million”.
The spokesman said Corrs was a private partnership and the appointment of the senior partner and CEO was a matter for the partners alone and remuneration had never been publicly discussed.
Insiders told this masthead that COVID-19 had contributed to all major law firms increasing revenue, and Corrs’ performance had also been bolstered by poaching successful teams from other legal firms.
One need look no further than disgraced consulting firm PwC for guidance of what can go wrong if profit becomes a disproportionate motivator.
Ziggy Switkowski, who authored the recent report on PwC in the aftermath of the firm’s government tax policy scandal, noted that the consulting group’s “aggressive growth agenda overshadowed and occurred at the expense of the firm’s values and purpose”.
“The focus on ‘whatever it takes’ seems, at times, to have contributed to integrity failures. Some partners did the wrong thing, while others failed to do the right thing by overlooking or minimising the significance of questionable behaviours,” Switkowski found.
That’s plenty for Corrs to reflect on between now and Wednesday, when the votes will be counted .