A changing of the guard at Cozen O'Connor

After decades under the control of two strong-willed, entrepreneurial leaders, a changing of the guard is under way at the Cozen O'Connor law firm, a Philadelphia institution that has grown from a handful of lawyers to one of the largest firms in the nation.

The firm has announced a huge reorganization that dilutes control of founding member Stephen Cozen and Patrick O'Connor, and today will disclose that it has named its first board of directors as part of the transition.

Sometime next month, the firm also is expected to name a new chief executive officer who will handle much of the day-to-day management and join the 16-member board. Meanwhile, the authority of other senior lawyers has been boosted through a reorganization that gives them a greater ownership interest in the 546-lawyer firm.

"We had to work out a restructuring that would enable the younger leaders to say that we have transitioned the firm - that it is not just Steve Cozen's firm or Pat O'Connor's firm," Cozen said. "You have to give younger people opportunities at leadership."

The agreement follows several years of internal discussion during which younger members pressed for greater authority. At the same time, both Cozen and O'Connor said they had concluded that the firm's recent growth spurt might be thwarted unless other key players were given more authority.

As part of the agreement, which was adopted unanimously by about 100 voting members of the firm in March, both Cozen, 67, and O'Connor, 64, were given 10-year employment contracts. Both Cozen and O'Connor say they will continue to practice law intensively and play a role in policymaking, but the firm's management will be handled largely by others.

Cozen will have the title of chairman, and O'Connor will be vice chairman.

"I have been very well paid, and I am going to continue to be paid, not as well as I had been, but I am not going to be working as hard as I have been," O'Connor said. "You should always give up power from a position of strength, not when you become sick or become a dilettante. You do it when you are the top of your game."

Cozen O'Connor, with 23 offices around the nation and in London and Toronto, is Philadelphia's fourth-largest law firm, after Morgan Lewis, Dechert L.L.P. and Duane Morris L.L.P., as measured by total number of lawyers.

Cozen founded the firm in 1968, and quickly developed a lucrative and highly specialized practice representing insurance companies and others in recovering financial losses.

Its clients have included the Lloyd's insurance syndicates in London, and it has been involved in recovering losses from huge fires and other catastrophes. Among them were the MGM Grand hotel fire in Las Vegas; the fire at One Meridian Plaza in Philadelphia, which resulted in the deaths of three firefighters and $4 billion in civil damage claims; and the Sept. 11 terrorist attacks in New York, perhaps the biggest insurance case of its kind yet.

The firm has long dominated this kind of work, but in recent years has used its contacts in the insurance industry and among large firms that self-insure to develop other practice areas, including intellectual-property and transactional work and general litigation.

While Cozen is large - it is ranked among the top 100 firms in the United States - it also is under pressure to grow even more as clients expand their geographic reach, not only in the United States, but in Europe, Asia and the Middle East.

Several months ago, it had engaged in intensive discussions with another large Philadelphia firm, WolfBlock, about a possible merger, but those negotiations foundered over blending pension plans and different fiscal years as well as other economic issues.

As corporate clients seek to gain efficiency and cut costs by paring lists of outside counsel, they increasingly select firms that not only are widely dispersed geographically, but also have multiple practice areas with teams of lawyers who can be mobilized quickly.

That has forced Cozen and other firms to recruit lawyers with specialized skills and "books of business," or clients they can bring to the firm with them.

But Cozen's unique ownership structure - a stockholder-owned corporation with Cozen and O'Connor holding the vast majority of shares - may have made it more difficult to recruit some new lawyers, said Lawrence Bowman, who is based in Dallas and heads Cozen's litigation department.

The restructuring addresses that issue by giving all of the firm's 115-plus shareholders equal numbers of shares. Beforehand, Cozen controlled more than half the shares, and O'Connor had the next-highest amount.

Bowman, who has been with Cozen since 1982, said prominent lawyers on occasion had expressed concern about joining the firm because so much decision-making authority had been concentrated in the hands of two men.

"It's a factor, people have expressed bits and pieces of this," Bowman said. "I went to Cozen and O'Connor myself and expressed the need to do this [the restructuring] in order to allow for a more orderly growth of the firm.

"A well-situated lawyer in Dallas doesn't want to come to a firm where all the important decisions are being made by guys in Philadelphia whom he doesn't have a relationship with," Bowman said.

Lawyers at the firm, including Cozen and O'Connor, said it also was essential for the firm's leadership to move beyond its first generation of entrepreneurial leaders, turning over control to a new group of managers who otherwise might not stay.

"Look at, in particular, at some of the great plaintiffs' law firms," O'Connor said. "When their founders moved on, the key [next-generation] leaders of the firm had already moved on."

O'Connor, now the firm's CEO, said he would move from Cozen's Center City office to its office in West Conshohocken, signaling that his days as a key decision-maker were over.

"I am not going to agree with everything they do," he said of the firm's new leaders. "But you know what? God bless 'em."