Rohan Weerasinghe, head of the Wall Street law firm of Shearman & Sterling, received unwelcome news this month. Five partners, including the asset-management group chief, jumped to a New York rival.
The turn of events was not entirely unfamiliar. Some partners were already heading for the exits when Weerasinghe became the head of Shearman in June, as a critical profit measure lagged other major firms.
The 133-year-old firm, which advises on capital markets and mergers and acquisitions for big banks, reported revenue of $775 million in 2004. That put it 11th among U.S. law firms. Yet its profit per partner, a legal-industry benchmark, was 29th.
Law firms typically split the annual profit among partners. When per-partner profit slips, any firm can be vulnerable to departures, said Bruce MacEwen, a law firm consultant.
When per-partner profit falls, competing law firms also find “poaching partners becomes more attractive, and in a very nasty fashion,” MacEwen said.