Weil Gotshal collapse exposes the fragility of law firm partnerships

Law firm partnerships are inherently fragile due to their lack of residual equity value and transactional cultures, making them susceptible to sudden partner departures and bank-like runs and proposed government restrictions on non-compete clauses will make it worse, says Stephen Phillips I was a partner in a couple of major global law firms. At some point a stark realisation hit me: although as an equity partner I owned a fraction of the business, the moment I stopped working, my income and interest in the business stopped completely. There was no residual value from past deals. The day I walked out, my past work added nothing to the firm’s future balance sheet, and there was nothing for me to cash in – when you leave you just get your equity back – the exact same amount as you put in. Contrast that with a senior executive at a listed company or private-equity-backed business. Over a long tenure they typically build a residual stake in shares or options that continues to refle