Peers should look at how the situation arose at insurance and reinsurance specialist Dewey & LeBoeuf which led to its demise and take heed.
This is the opinion of Kent Zimmermann, partner at legal consultancy Zeughauser Group.
“What happened with Dewey is somewhat unique. One of the main culprits in the Dewey failure was the leadership’s decision to give unconditional compensation guarantees to nearly a third of its partnership,” he says.
“When it decided to do that, and then its revenues dipped, the firm had a hard time keeping up with its compensation obligation.”
Another issue Zimmermann identifies is communication, as most Dewey & LeBoeuf partners did not know the extent of the compensation guarantees that had been promised to the rest of their colleagues.
“What was highly unusual was that the leadership gave all of those compensation guarantees to both new partners, as well as existing legacy partners. Many of the partners did not know about the extent of those guarantees, until soon before the firm failed. That is highly unusual and other firms could learn a lot from how that unfolded.”
Dewey & LeBoeuf, law firms, Kent Zimmermann, Zeughauser Group