The ongoing spat around the value – or otherwise – of firms reporting profit per equity partner (PEP) shows no sign of abating, with a stream of industry leaders weighing in on the debate.

The row over PEP was sparked by Dentons' decision to stop reporting the figure, as first reported by Legal Week last week.

The move by Dentons , which was announced by way of a letter to The American Lawyer, has developed into a public exchange between the firm and sections of the legal press on both sides of the Atlantic.

Dentons' argument centres on four key aspects; that the figure "says nothing about the success of a firm", that its reporting can lead to client dissatisfaction, partners within firms do not like the figure being made public and "a focus on profit undermines the differences between the practice of law being a profession rather than solely a business".

Partners at leading firms have offered a mixed reaction. While a straw poll of senior figures does not suggest overwhelming support for Dentons' stance, most have questioned the merit of PEP as a measure of success.

Speaking to Legal Week, Slaughter and May practice partner Paul Olney, whose firm does not report any financial information, said he had "some sympathy" with Dentons' position, adding that PEP was "not meaningful as a guide to a firm's standing or reputation".

Olney continued: "PEP can be vulnerable to a variety of sometimes short term factors and one of the downsides of the publication of financial performance (which we have refused to do) is that it can drive short term measures to enhance profitability. For example higher PEP figures can be the result of de-equitisations, or a slow down or freeze of new partners.

"There may be good reasons for doing both of these things but the focus on PEP through annual publication can contribute to generating short term reactions rather than a longer term or strategic evaluation. The growth of salaried partner numbers can also have a flattering effect. And higher PEP can be achieved in different ways. Some firms might be mandated on the largest and most remunerative deals in the market, but others might achieve excellent PEP figures if they have a tight hold on equity partner numbers and engage in more highly geared work. There isn't a 'right' model – just different models and strategies."

Other commenters expressed concern that PEP had become too open to manipulation. One partner, who did not wish to be named, said: "The focus on PEP has led to it being manipulated, and anyway tells you very little about what partners receive, or the economics of the business. A high PEP might mean an averagely performing firm (financially) with a tight equity group."

Indeed, a Legal Week survey of more than 140 partners revealed that more than three quarters had little or no faith in the reliability of reported PEP figures. Responding to the same survey, nearly half (47%) said that financial transparency was "irrelevant" to law firms.

Ben Tidswell, chairman of Ashurst, agreed that PEP was an "imperfect measurement", but added that "it's one we keep an eye on".

"It clearly isn't a universal measure, but to say it's not a measure at all is also clearly not true," he continued. "I think the point on the inaccuracy of a true global average is perfectly valid, as it's undoubtedly the case that the performance of a business in multiple global centres cannot easily be compared with that of (say) a New York only firm. "

K&L Gates chairman and global managing partner Peter Kalis said: "In an industry with radically different geographical footprints, strategies, investment priorities and financial structures, any metric expressed as an average (e.g., PEP, RPL) is highly imperfect as a basis on which to compare law firms.

"But a retreat into opacity is not the right answer and would be inimical to the interests of our industry. Each law firm metric, including PEP and RPL, is a chip in the mosaic of a law firm's financial health, and the picture that emerges is a useful constraint on the activities of incumbent management. Indeed, we'll know that our industry has matured when the leading industry publications begin asking for balance sheet information and other indicia of financial stability such as that which we provide in the annual public disclosure of our finances posted on our web site. Such information gets to the heart of a law firm's financial health, and its public scrutiny can prevent law firm failures."

Kalis went on to say: "My entirely gratuitous advice to law firm leaders is to embrace the quasi-public role of our profession by promoting transparency instead of opacity. My equally gratuitous advice to leading legal publications is to address the material holes in your financial reporting by eliciting balance sheet information and other indicia of financial stability as well as PEP and the like."

Peter Martyr, chief executive of Norton Rose Fulbright, which, like Dentons, operates a verein structure with separate profit pools across the world, said: "The reason we get talent in our markets is because we're prepared to pay them at the right level of remuneration. PEP doesn't mean what people are paid, but an averaging figure affected by how you do your accounting, how many different types of partners there are in different parts of the world, how many parts of the business are included in the consolidated accounts – there are so many variables that the only way you can look at it in some respects is, is the business healthy, is the business growing?"

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