At least 25 top law firms will see departure of top leaders in 2023-2024; is there 'demographic bubble'?
“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 legal consultant Kent Zimmermann of the Zeughauser Group. Image from Shutterstock.
Leaders at the nation’s top 100 grossing law firms are increasingly announcing plans to step down.
Top leaders have already left their posts or have announced plans to leave in at least 25 Am Law 100 firms in 2023-2024, Law.com reports. That’s an average of almost 13 per year, compared to an average of 10 firms per year in 2006-2022.
“Given that there may be other top leader changes announced and effected in 2024, turnover is up and may be up materially,” the publication reports.
Firms with leadership changes include Wachtell, Lipton, Rosen & Katz; Reed Smith; Goodwin Procter; Holland & Knight; Wilmer Cutler Pickering Hale and Dorr; Cooley; Fried, Frank, Harris, Shriver & Jacobson; and Troutman Pepper, according to Law.com and Bloomberg Law.
Legal consultant Kent Zimmermann of the Zeughauser Group told Bloomberg Law that he has heard from more than 10 managing partners or chairs of BigLaw firms who intend to retire in the coming months. Usually, he hears about departures from three to five firms each year.
“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,” Zimmermann said.
The average tenure of the departing leaders in 2023-2024 is 12.8 years, compared to 11.5 years in 2006-2022, according to Law.com. The average age of departing leaders is 66 in 2023-2024, compared to 63.9 in 2006-2022.
Law.com points to two reasons why top leaders may be staying longer. First, there is increased labor market participation by people ages 55 to 64, and this may also be reflected at firms. Second, top leaders may have stayed in their posts “to see their firms through the transformative changes driven by COVID.”
The age issue is also reflected at the partnership level, according to Bloomberg Law.
Leopard Solutions, a legal industry data provider, estimates that about 22% of partners at the nation’s top 200 firms are age 61 or older, based on the year that they graduated from law school. Among managing partners, CEOs and chairs, about 40% are estimated to be 61 to 70 years old. About 8% are estimated to be 71 to 79 years old.
Firms with older partnerships “are giving the succession issue urgency,” according to Bloomberg Law. “If you have a demographic bubble with a lot of retirements coming, you will have large returns of capital, as well,” said Michael McKenney, managing director of Citi Global Wealth at Work Law Firm Group, in an interview with Bloomberg Law.
At one time, firm partners had an incentive to stay at a firm for life and to retire at a set age. Keeping the partners at the firms were defined-benefit pension plans that provide a specified monthly payment at retirement. Retirements were necessary under mandatory policies at a majority of firms.
Then two BigLaw firms were hit with age-bias lawsuits stemming from mandated retirement, resulting in settlements in 2007 and 2012. Now, about 50% of the nation’s top 50 firms and four U.K. Magic Circle firms require retirement at a certain age.
As a result of the changes, senior-level partners could move to other firms without losing pension benefits, according to Bloomberg Law. The changes also reduced incentives for partners to share their business with others.
“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,” according to Bloomberg Law.