Good People, Bad Partners: Conflict Resolution through Good Governance Policy

What makes good people be bad partners? Over the past month I’ve witnessed the dissolution of a law firm’s 15-year partnership. It began when one of the senior partners filed for divorce. The timing was unfortunate. It came just weeks before two high-powered associates were scheduled to buy shares. A buy-in signals the value of the stock. Fearing the repercussions, the senior partner (the one with the looming divorce) announced he wanted to put the deal on hold. “We have to wait,” he told his colleagues. Secretly, he was holding out for more money.

Fast forward two months. Five partners split away, forming a new firm, taking several associates with them, including the two who were scheduled for the buy-in. The senior partner became one of four shareholders in the firm. Three months later, the firm filed for bankruptcy, citing an excess of debt and an inability to draw in new investors.

Could this have been prevented? Of course. With the appropriate governance mechanisms, the firm could have put in place systems to deal with conflicts such as these. It requires trust to build those types of systems – and a desire to make those decisions long before trouble occurs. Most important, everyone needs to assume responsibility. In this case, they hadn’t. And that made all the difference.

LRI helps Boards and other governing bodies develop clarity about their role and that of management – and achieve higher levels of performance:

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