Walker Clark Worldview

As my colleagues and I advise law firms on governance issues, such as managing the growth of the partnership, partner compensation, or capital requirements, we and our clients sometimes discover that it has been many years since the partnership agreement, partnership deed, by-laws, or other corporate “constitution” has been reviewed.

Although signing the partnership agreement is a time-honored ritual of becoming a partner, we have actually seen partnership agreements that do not bear the signature of any current partner.  In a very few cases, the partners have been unable even to locate any copy of their partnership agreement.

I hasten to point out that these law firms are not bunches of  bumbling incompetents.  Almost all of them are otherwise well-managed and reasonably successful. With all the demands on partners’ time, sometimes the basic foundations of law firm governance are overlooked, assumed by the partners to remain solid despite the passage of time.

This assumption ignores a fundamental risk in business. Past success guarantees nothing in today’s legal markets.  The fact that your law firm has done well in the past does not mean that your governance system will be able to respond appropriately and efficiently to future challenges.

Should your law firm review and update your partnership agreement or other corporate documents? Here is a quick and very reliable diagnostic checklist:

1. Has it been more than 10 years since you wrote or last revised your agreement?
2. Has your partnership grown by more than 30% since then?
3. Are any of your partners over 50 years old?
4. Are your younger partners unhappy with their compensation?
5. Are you thinking about a merger with, or acquisition of, another firm?
6. Is is harder to make decisions now than before?

If you answer “yes” to any of these questions, now is good time to review your partnership agreement to see whether it might need to be updated.

Norman Clark

Tags: compensation, governance, leadership, partners

This entry was posted on Friday, February 19th, 2010 at 16:45 and is filed under partners. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.