Explain the likely consequences of the twoincentive systems referred to in the following newspaper clip. Guess underwhich circumstances will each system be more efficient. Try using the databelow to test some of your conclusions. Which system requires more control?
“Most top-tier New York [law] firms alsoshare profits among partners based on how much business each brings in. This isknown in the trade as ‘eat what you kill’, which gives some idea of the kind ofaggressiveness it encourages. All five of London’s top firms, by contrast,share profits among partners according to seniority, a system appropriatelyknown as ‘lockstep’, which they believe encourages teamwork and minimisesinternal squabbling. To persuade Rogers & Wells to merge, Clifford Chancehad to agree to a ‘modified’ lockstep, letting the New York firm’s biggestrainmakers keep their higher earnings until 2002, when lockstep is supposed tobe reimposed”.[1]
[1] Source: The Economist, “LawyersGo Global: The Battle of the Atlantic”, February 26, 2000, p. 90.