Wave of Big Law Leader Exits Stokes Succession Concerns

After defying pandemic expectations of mass retirements, senior Big Law firm leaders have been enjoying extended runs at the top. But there’s evidence that a changing of the guard may be underway as a growing number of managing partners, chairs, and CEOs announce plans to step down.

“I can’t remember a time in the past couple of decades of advising law firms that this many chairs and managing partners have told me they are going to hang it up within such a short period of time,” said Kent Zimmermann, a legal business and succession consultant based in Newport Beach, California, at Zeughauser Group.

This year, Zimmermann said he has heard from more than 10 managing partners or chairs of some of the nation’s largest firms that they intended to step down or retire by the end of the year or in the first quarter of 2024. Normally, he said, he hears from three to five firms a year about such intentions. Of those whose departures were announced, most are leaving leadership posts, but not giving up legal practice, a review of recent announcements shows.

While Zimmerman declined to identify the partners he’d spoken with, a search of law firm announcements shows that from January to October 2023, Reed Smith,
Goodwin Procter, Holland & Knight, WilmerHale, Cooley, Fried Frank, and Troutman Pepper all announced that their chairs, CEOs or managing partners were stepping down or planned to early next year. Most, but not all, of the group exiting leadership roles are in their 60s or older, according to published media accounts and public records that include state bar admission dates.

Many of the leaders are leaving their executive roles and focusing on their practices at the firms. Some are retiring from the practice to serve on nonprofit boards and the like. Others are retiring from their firms to practice law elsewhere.

The job of leading a law firm is “all-consuming and more of a pressure cooker job,” Zimmermann said. Many leaders do two four-year terms, he said. “Some have been doing it between 10 and 20 years and they feel like it is time and I agree with them,” he said.

Alexander “Sandy” Thomas, 57, stepped down as global managing partner of Reed Smith in March after 10 years in the role and retired from the firm to become chief legal officer of a nonprofit organization called KIND, Kids in Need of Defense. Thomas said it was a long-planned transition, and noted: “The complexity of leading firms that are growing and operating internationally [has] gone up a lot.” He was succeeded by Catherine “Casey” Ryan, who will serve the rest of his term until the next scheduled election in 2025, according to the firm.

“I will say that the demands for growth, both geographic and profit growth, have only gone up since the whole time I was in private practice and they have gone up a lot,” he said in an interview. “Having said that, you can’t say those things without saying it makes the job thrilling, gratifying, and very exciting. It is a very demanding job though, no question about it.”

Alexander “Sandy” Thomas, Chief Legal Officer of Kids in Need of Defense

Credit: Kids in Need of Defense

Contrary to legal industry speculation during the Covid-19 pandemic, of the roughly one-third of respondents who made any change to their plans, about as large a share of lawyers who changed their retirement plans delayed their retirements (53%) as hastened them (47%), according to a 2021 American Bar Association survey of 1,400 lawyers aged 62 or older. But now that the crisis has passed, more partners are expected to begin the transition out of their positions, consultants and firm leaders said.

The aging of the partner population, combined with dwindling mandatory retirement policies and the demise of many defined-benefit pension plans in favor of defined-contribution plans are giving the succession issue urgency at a time of rapid changes in the legal profession from technology, and changing societal and workplace norms.

More firms may need to sharpen their focus on succession planning.

However, “trying to get a lawyer to talk about the end of their careers is like selling life insurance to someone in their twenties,” said Jim Cotterman, principal of Altman Weil Inc., a law firm compensation and management consultancy that also advises on succession planning.

How Did We Get Here?

Roughly 22% of law firm partners in the top 200 firms by revenue are estimated to be age 61 or older, based on the date of they attained their law degrees and a graduation age of 27, according to data supplied by Leopard Solutions, a legal industry data provider in October 2023. When you limit the pool to managing partners, CEOs, and chairs, about 40% are an estimated 61 to 70 years old and about 8% are 71 to 79 years old.

That means there are many partners in their 60s and older who are still at the helm of many Big Law firms, and they control a large share of the firm’s business and client relationships.

“If you take the people over 60, I suspect that it wouldn’t be unreasonable to say that half the capital in the firm is probably tied up with the senior partners and all the rest divided by the others,” Cotterman said.

Managing director of Citi Global Wealth at Work Law Firm Group Michael McKenney said, “if you have a demographic bubble with a lot of retirements coming, you will have large returns of capital as well.”

Data Visualization by Seemeen Hashem/Bloomberg Law and Leopard Solutions

A sudden surge in retirements or other partner exits can be profoundly detrimental to law firms.

In August of this year, mid-size Philadelphia firm Schnader Harrison Segal & Lewis folded after 88 years, reportedly, in part, because of internal succession planning challenges including an abundance of senior partners who brought in less work than they had in the past and inability to hold onto major clients when the firm rainmakers started departing for other firms. In the early 2000s the firm employed more than 300 partners but was down to 91 when it folded, Bloomberg Law reported.

Earlier, Boston-based firm of Testa, Hurwitz & Thibeault, founded in 1973 and with 400 attorneys at its peak, disbanded in 2005 after the death of its co-founder in 2002, without a clear successor. The firm also suffered the departure of a core practice group of IPO and venture capital practitioners in the dot-com bust, followed by dozens of other lawyers, according to contemporaneous media reports.

The firm was ranked No. 148 in gross revenue in the Am Law 200 the year before it collapsed, according to a study of 37 law firm collapses by Yale Law Professor John Morley published in 2020. LeClairRyan collapsed in 2019 after the departure of a founding partner and did not go a second generation, and many partner defections requiring returns of capital.

Financially troubled firms often attempt to save themselves by merging with other, stronger law firms, industry observers said.

“Virtually every collapsed firm has gone to its grave searching desperately for a merger partner,” Morley wrote, citing Heller Ehrman, which closed in 2008, as another example of a firm that failed after a “partner run” of exits. It was ranked 56 in the Am Law 200 the year before it collapsed.

More recently, on Oct. 30, 150-year-old Stroock & Stroock & Lavan announced plans to wind down after several failed attempts to find a merger partner and numerous departures from its bankruptcy and real estate practice groups.

Changes in retirement policies and pension plans since the 1970s helped create current succession headaches for law firms.

At one time, a majority of firms had age-based mandatory retirement policies and defined-benefit pension plans that created incentives for partners to stick with a firm for life and retire at a set age to collect on the pension. But that started changing in the late 1970s through the 90s, according to Peter Giuliani, a partner at Smock Law Firm Consultants, based in Weston, Connecticut.

During that time period, the retirement age increased at many firms, but 60% to 70% of law firms still had an age cap well into the 1990s, said Giuliani, who has been advising firms for about 55 years and is author of a book on law firm succession planning.

Then, in 2007, Sidley Austin entered into a $27.5 million consent decree with the EEOC to resolve an age bias lawsuit from 32 attorneys forced out of the partnership or involuntarily retired under the firm’s age-based retirement policy. Another age discrimination suit by the EEOC against Kelley Drye & Warren was settled in 2012, and the firm was obligated to stop requiring partners to give up equity in the firm at age 70.

“For big firms, this is what put focus on the succession issue,” Giuliani said, of the legal actions against mandatory age-based retirement policies.

In Aug. 2007, the American Bar Association passed a non-binding resolution against mandatory retirement policies, after a voice vote from its House of Delegates.

Today, the share of top 50 US firms and four UK Magic Circle firms with age-based mandatory retirement is about 50%, with the most common age being 66, said McKenney, referencing a 2023 client advisory survey of these firms by the Citi Global Wealth at Work Law Firm Group, whose partner age data comes directly from survey questions. About 19% of firms said they let partners decide on their own when to retire. Thirty-one percent said they have individual discussions with attorneys, he said.

The end of age-based mandatory retirements and the decline in defined benefit pensions changed the game. The ability of senior-level partners to jump to other firms without losing built-up pension benefits reduced incentives for partners to share business relationships with others at a firm and increased lateral movement, consultants and business of law scholars said.

David Wilkins, director of the Center on the Legal Profession of Harvard Law School, said today’s firms “are paying more attention to leadership and management because the stability they [firms] used to have in the 1960s, when there was no lateral movement of partners, associates didn’t move, clients were stable and that made the law business stable and predictable, have all been upended.”

Partners’ and clients’ increased mobility created by the changes in retirement policies and pensions has presented new challenges for firms trying to both develop rising stars and hold onto important clients.

At some top firms, increased lateral hiring helps them fill practice voids, add depth, and provide a lateral partner’s capital infusion to reinforce the firm’s capital structure, McKenney said. But unplanned exits like sudden retirements require return of partners’ capital, which may not match the pace at which the firm is raising capital, and create concerns around client coverage, he said.

Reluctance to Pass the Baton

Another problem—linked to succession planning, or a lack thereof—is what many legal industry observers described as a growing generation gap between senior firm partners earning compensation from business generated years earlier, and younger partners and senior associates.

They said senior associates and younger partners are frustrated by a lack of opportunities to assume client relationships, get promoted, or make meaningful changes in firm culture, such as over flexible work hours and return-to-office policies.

“Reluctance to pass the baton is causing friction and retention problems at many firms,” said Laura Leopard, founder and CEO of Leopard Solutions, resulting in the loss of up-and-coming talent through lateral moves and increasingly, exits from Big Law, period.

A January 2023 report by Leopard Solutions found there are now fewer mid-level partners (30%) than top-level partners (36%) in the Top 200 firms.

“Our data shows there are a large number of men and women leaving in mid-career who are leaving Big Law and not returning to Big Law,” Leopard said. One managing partner at a top 200 firm told her recently that “what keeps him up at night is that he doesn’t know if he’ll have enough partners to run the firm,” Leopard said.

Jennifer Wu, a former patent litigation partner at Paul, Weiss, Rifkind, Wharton & Garrison who left in November 2022 to establish her own firm, Groombridge, Wu, Baughman & Stone, said of Big Law firms generally, “the generation gap is extreme.” She added that there is a “mismatch in what makes people happy in the younger generation and what the older generation thinks will make you happy.”

Some flash points, she said, include work-life balance and equal opportunities for women and diverse lawyers. As well, many millennials and Generation Z attorneys tend to have a more entrepreneurial approach to their careers and are less interested in administrative roles.

The tendency of senior partners to groom successors who are copies of themselves rather than to foster lawyers who may be different also creates obstacles for attorneys who are women and diverse attorneys’ abilities to inherit client relationships and develop into leaders, said Roberta Liebenberg, a senior partner at Fine, Kaplan and Black in Philadelphia and a principal of the Red Bee consulting group, who co-authored a 2019 ABA study on why women lawyers leave Big Law practice.

“It is not really a shift if you simply pass the baton from one set of people with a certain set of experiences and background to another set of people with the same experiences and background. It is not in service to an organization or the people in it,” said Betsy Miller, a partner and former leader in the public client practice at Cohen Milstein in Washington, D.C., and an adjunct professor at Harvard Law School.

Betsy Miller, partner, Cohen Milstein

Credit: Courtesy of Betsy Miller

She added, “it is important to impose term limits on leadership so that new perspectives are always part of the mix; and it is equally important to give thought to what mix of skills and experiences are needed to make an executive committee.”

Also important: Transitioning senior partners to new roles or retirement to keep them from jumping to other firms with their clients— something that has become more common in recent years. At the same, firms must keep young potential leaders happy to ensure lateral hiring strength and retention.

Research indicates lateral retention of partners is better at firms with the youngest managing partners among the Top 50 firms, Leopard said.

Zimmermann said losing the next-generation of talent hurts a firm in the long run. “There are almost never enough people with the attributes needed to run a firm who are willing to lead and do the job,” he said.

As Reed Smith partner A. Scott Bolden, former managing partner of the firm’s Washington, D.C. office, said: “Succession planning starts not at 60 or 70, but when you have young partners in their 40s and 50s and it doesn’t end until there is a transfer of clients. Many law firms if they are smart, they have succession planning in place, but the real question is, how well do they implement it?”