Jul 26, 2010, 03.03 PM | Source: Forbes India
Amarchand & Mangaldas, India’s biggest law firm, has all the trappings of a family-run enterprise including sibling rivalry. The Shroff brothers must quickly set their house in order
Shardul Shroff disagrees. He points to the fact that two out of every three initial public offers of shares last year were handled by Amarchand and they were all executed by people other than family members. “These are full time capital market lawyers, each managing 60 lawyers under them, and these are the people executing, not us!” But what the lawyers really want is a higher percentage of profit sharing.
The Shroffs have over the last two years conceded this demand through an ambitious project called Project Moses. Since Project Moses, the family pool now holds 75% and the number of equity partners have increased to 17. The non-family share is distributed through a seven step lockstep process and top of the equity pile is about USD 2 million. The lockstep will most likely pause when profits are split 50:50 between non-family and family members.
“This is a modified lockstep in the sense that if somebody is not performing as well as expected, they can be halted and if somebody is really performing well, they can be advanced quicker,” says Nick Jarrett-Kerr, a consultant specialising in strategy, governance and leadership development for law firms and who advised Amarchand on the overhaul of its lockstep “But even though the family share will eventually dilute over time, it will become a smaller slice of a bigger pizza.”
The move is welcome. Equity partners like L. Viswanathan and Ashwath Rau, both contemporaries of Guptan, feel the lockstep is a sign that the Shroffs want them to have a real stake and sense of ownership in the firm. They never left because they feel adequately rewarded, have strong client relationships that were allowed to develop and they maintain Amarchand is the best law firm to work for. “The legal profession in India continues to be dominated by individuals. Just like Jack Welch of GE dominated his space. But he didn’t do it at the cost of others — he was a giant among giants. You have to build other giants, “says Dinesh Kanabar, Deputy CEO of KPMG, India. Accounting firms like his went through similar challenges in professionalising about 30 or 40 years ago.
But the decision to relinquish control was a tough one. “I was in a despondent mood,” admits Cyril. “It was a huge emotional decision. Some of that tension is still there in the mind because you don’t know what will happen, but we have no choice, given our ambition. Having taken that decision, it’s a one way street and we have to move forward.”