Towards the end of 2019, Legal Business remarked that the issue at the heart of Allen & Overy (A&O)’s looming leadership election was if the process would resolve whether the winners could achieve the right to genuinely lead the City giant. Now that the election has concluded, with the re-election of Wim Dejonghe (pictured) as senior partner and the elevation of projects and energy head Gareth Price as managing partner in place of Andrew Ballheimer, it is far from clear that the point has been settled.
That is not a criticism of the calibre of the candidates and winners. Generally regarded as the best managed of the Magic Circle’s four internationalists, A&O certainly attracted a line-up of heavyweight candidates, by no means a given in law firm leadership run-offs. This was most obvious in the contest between Dejonghe and banking co-head Philip Bowden for senior partner and Price and litigation head Karen Seward for the managing partner brief.
Being saddled with the difficult baggage of A&O’s marathon-but-recently-abandoned bid to merge with US firm O’Melveny & Myers, a re-election for Dejonghe that would have a year ago been a shoo-in was regarded instead as a knife-edge call against the much-liked Bowden. Had Dejonghe not been aided by Ballheimer’s decision not to go for re-election, increasing the case for a continuity figure in the core leadership team, it may have tipped the other way.
Seward-versus-Price appeared another close contest, with some disappointment that A&O didn’t become the first Magic Circle firm to elect a woman to its c-suite. But in truth Price brings a very strong consistency, being cited for his energy, intelligence and drive both inside the firm and by informed outsiders. Having led one of A&O’s most celebrated practices, Price has also supported its global drive in projects and pulled off the notable feat of establishing himself after celebrated figures like Graham Vinter and Anne Baldock departed. He also benefited from A&O’s preference for having a finance figure in senior management.
This is not the time for split-the-difference attempts to fudge the choices A&O is facing.
‘Lots of energy and a fizzing brain. Fierce intelligence,’ notes one former partner, while another former A&O man at a US firm observes: ‘Gareth is a smart guy, really clever and a good choice. Personally, I’m surprised they didn’t elect Karen. It’s about time the Magic Circle elected a woman managing partner. All things being equal, Karen should have got it, but maybe all things weren’t equal.’
Which brings us to the unresolved issue. Many feel that Seward’s candidacy would not have been helped by being seen as too close to Dejonghe – both are viewed as committed globalists with a strong working relationship, while Price is seen as more likely to stand his ground on key strategy points. There are mixed views on how committed Price will be to expensive foreign expansion. But certain key matters of policy certainly need to be resolved, most pressingly around governance, US strategy and, for obvious related reasons, remuneration. The abandoned O’Melveny talks dragged on for so long largely because it would have involved wholesale reform of A&O’s partnership to accommodate the Americanisation of its business.
What remains to be seen is how effective the pair will be at providing the clarity that A&O needs if it is to keep competing in what has become a more challenging global market. A few cynics have claimed Price will undercut Dejonghe’s determination to secure a US breakthrough and push forward the kind of governance reforms needed to speed up decision-making. A bigger pool of opinion is that all the candidates were on board with the need for A&O to materially raise its game in the US but that still leaves difficult questions about the pace of investment that the A&O partnership is ready to stomach.
All of that indicates A&O – like its City peers – is potentially still stuck at the same strategic roadblock. These firms, with the exception of Linklaters, which has been consistently bearish on US investment, in theory accept the need for a dramatic improvement in their US businesses, without being willing to accept what will be required in practice to make such aspirations a reality.
But this is not the time for split-the-difference attempts to fudge the choices A&O is facing – the last leadership contest at Freshfields demonstrated the limitations of that approach in a more competitive global market. A&O did at least thrash out much of the detail on what major reform could look like during the O’Melveny process, including a model that could have paid a few select stars $8m a year, with the understanding the model could deliver $6m deals for a wider pool of high performers. There will also be a tricky debate about lowering voting thresholds, currently as high as 90% on some matters, to a level more conducive to effective decision-making, such as the 60% to 75% range.
Moreover, it barely needs saying with the coronavirus outbreak spreading disruption and fear across Europe, A&O is now facing the kind of severe upheaval that it last encountered during the banking crisis. That was a period in which A&O distinguished itself with clarity and clear communication. The firm is fortunate to have two-highly regarded individuals at its helm. Now they must find a common cause and move A&O decisively forward while there is still time.