Dentons escalates PEP row: ‘no two firms are the same, so cannot be compared’

Dentons has ramped up its war of words with the media and industry analysts over financial transparency.

The firm has responded to critical questioning in the American Lawyer over its decision to stop reporting average profit per equity partner (PEP). The magazine’s article, “In Defense of PPP”, referred to Dentons’ move, which the firm defended as being “in the best interests of our firm, our clients and the profession as a whole”.

The magazine suggested that Dentons’ PEP had declined by 20 per cent over the past year.

Today (12 June) Dentons hit back with an unprecedented tirade against the magazine accusing it of a “lack of understanding of basic math, let alone simple logic” which it said was “stunning”.

Dentons global chief executive officer Elliott Portnoy and global chair Joe Andrew originally argued that average global PEP figures said nothing about the success of a firm and said partners often objected to voluntary public disclosure. They also argued that the reporting could lead to client dissatisfaction.

Finally they claimed that a focus on profit undermines the differences between the practice of law being a profession rather than solely a business.

Today the firm slammed the magazine for its estimation that PEP would have shown a 20 per cent decline over a year, the worst showing in the Am Law 100. In a statement today it said it was “literally impossible for the Editor in Chief’s analysis to be correct” because Denton’s composite firms were incomparable.

In an open letter it also said “measuring law firms by their profit per equity partner is at best misleading and at worst detrimental to the profession.”

The firm had originally acknowledged that its refusal to publish PEP because of its “polycentric” structure, created through a tripartite merger between SNR Denton, Salans and Fraser Milner Casgrain, was likely to “encounter criticism, and encourage the creative number crunching that other love to engage in”.

However today it insisted that PEP was a “meaningless” figure because “no two firms are identical, and some like Dentons are very different”.

“Contemporary law firms that operate in many different places and in many different business cultures cannot be compared with those that don’t,” it added. “It is an apples to oranges comparison.”

It concluded its statement by saying: “Let’s hope that the American Lawyer’s researchers understand math and logic better than their editors, and are willing to engage in meaningful and serious conversations about the changes in our profession and in our business.”

Dentons, a Swiss verein, is made up of five separate LLPs in Hong Kong, Canada, the UK, Middle East and Asia (UKMEA), the US and Europe but argued it was not possible to gather the information needed to compare LLP figures.

The firm argued that it was “absurd” to use the LLP data from composite LLPs to draw a year on year comparison as the firm only came into existence as Dentons in 2013.

However it added that “if you take the legacy firms that make up Dentons and who have either been forced to report their PPP for statutory reasons or who reported data for fiscal years that ended before we made the decision not to report, they are both up year over year.”