Of late, J. Sagar Associates has been in the news for a number of reasons. Akshay Chudasama, the firm’s long time equity partner left along with his team to head Shardul Amarchand Mangaldas in Mumbai. Berjis Desai, the man who took over the reins following Jyoti Sagar’s departure, is himself retiring soon.
Preparing for Desai’s exit, JSA will become the first of Big Law to be headed by women – Dina Wadia and Shivpriya Nanda will take over as Joint Managing Partners in January 2016.
Apart from Nanda and Wadia, the firm will also be guided by the Executive Committee, whose members include Partner Somasekhar Sundaresan. Bar & Bench’s Pallavi Saluja spoke to Sundaresan about changes at the firm, the CAM-SAM fallout, and Akshay’s exit.
Sundaresan also spoke about the differences between professionally run law firms and those managed by families, the two new Managing Partners and the firm’s core principles.
Pallavi Saluja: There is a huge churn in law firm market with the Amarchand Mangaldas split. What do you have to say about these movements in law firms? What is your assessment of the division?
Somasekhar Sundaresan: From a short-term perspective, there has never been a better time than now for being a young lawyer attached to a Partner who is moving firms. Despite the general investment sentiment of corporate India not being very bullish, there indeed seems to be a lot of money chasing Partner-level lawyers with packages for entire teams rather than for the Partners alone.
This is an interesting dynamic. For the firms that are being left, the loss of revenue from the exit of a Partner is also offset by the reduction in costs with the exit of the Partner’s team. Young lawyers typically have just come out of expensive legal education and are focused on repaying loans and building savings. One can completely understand their going with the flow and opting for bigger packages.
I am a firm believer that the churn is not necessarily bad for the industry. In fact, such churns are opportunities for law firms to sit up and introspect, and re-assess what they can do differently, more smartly and efficiently.
I am a firm believer that the churn is not necessarily bad for the industry. In fact, such churns are opportunities for law firms to sit up and introspect, and re-assess what they can do differently, more smartly and efficiently.
Having said that, a word of caution: all asset bubbles create what are called “negative externalities” for the marketplace. What I can clearly see competition doing now is offering expensive packages to lawyers and yet offering throwaway fee rates to clients – somewhat like predatory pricing. This can hurt those who are me-too offerings without unique selling propositions.
Any business must grow either organically (intrinsic business growth) or inorganically (acquisition of other businesses). If the acquisition of lawyers is not coupled with acquisition and movement of business along with the lawyers, it could lead to the increase in retainer payouts to lawyers becoming an asset bubble – something like an asset-liability mismatch, where the payouts to lawyers are inflated without the lawyers bringing in revenue to offset the costs they represent.
If this were to continue for a sustained period of time, at some point, growth without intrinsic value could prove very expensive. The business owners would then worry about the falling return on capital employed and that could lead to cutbacks. Meanwhile, if the young lawyers who are part of the mix have started building up expensive lifestyles and incurring external commitments such as EMIs on mortgages, they could suffer the worst during a cutback.
Meanwhile, if the young lawyers who are part of the mix have started building up expensive lifestyles and incurring external commitments such as EMIs on mortgages, they could suffer the worst during a cutback.
PS: Akshay Chudasama was the third highest revenue-maker at the firm. How has his departure affected the firm?
SS: Our revenue numbers are confidential and I cannot even confirm or deny what the revenue ranking or profitability of any individual partner is. Losing Akshay is a qualitative loss from the workplace, of a dear friend and colleague. Not many people know that his stint at JSA was the longest he had with any firm in his entire career. There is a certain qualitative bond that develops with such long-term relationships and that personal bond can never be affected by which place one works with.
At JSA, we treasure relationships and for us, relationships are not defined by money. On quantitative terms, I can say this: the unique no-owner model of JSA ensures that our equity ownership is widely diversified and no one Partner has a profit share anywhere close to double-digits.
That means that the loss of one or two Partners will not materially impact JSA financially. Today, I can say that no partner’s movement will really affect JSA if the firm remains true to its founding principles and stays commercially prudent without contributing to the HR asset bubble. No single partner, including me, is truly indispensable in the overall journey of the firm.
PS: What steps has the firm taken after Akshay’s exit to retain its resources?
SS: Truth be told, there is an extraordinary interest, particularly in the online media read by an exclusively law-firm audience on this issue – far more than warranted.
We remain who we are, and need to maintain that – true to our intrinsic character. New leaders will emerge in all institutions regardless of what Cassandras and naysayers predict. When Jyoti retired, many kept predicting that all hell would break loose.
Then as Berjis’ retirement date nears, the chatter is about how things will break down. We keep getting the pleasure of proving wrong those who question our model of being a professionally managed firm without a “promoter” or a “family”. We have undergone a projected leadership change for a smooth transition from Berjis to the two new Managing Partners elect, which is something that was underway and afoot regardless of the developments with Akshay.
The best feature on offer from JSA to retain its resources is the happy and comforting work environment. Worldwide, the work atmosphere in the legal profession can get quite toxic. Legal talent essentially wants quality work to do and a compassionate work place – perhaps in that order.
The best feature on offer from JSA to retain its resources is the happy and comforting work environment. Worldwide, the work atmosphere in the legal profession can get quite toxic. Legal talent essentially wants quality work to do and a compassionate work place – perhaps in that order.
PS: Aren’t professionally run firms essentially still 3-4 strong individuals and therefore not very different from a promoter or family firm model?
SS: Every institution can only be as good as the people who run it. This is true of law firms too. The fundamental difference between the two is that with professionally run firms, the ownership and management is merit-based while in a family-firm model, the ownership and management follows a bloodline.
Of course, the quality of people thrown up to the leadership in professional-owned model can suffer if good leaders do not find it conducive to stay together. A good institution would have systems in place to deal with that eventuality and to clean up intrinsically.
However, that would not be true of a family-firm model although it is as true that a family member who inherits the firm may make a great lawyer and leader. In that model, it is purely a matter of chance that a family member does not turn nutty and start hurting the family firm. This model also depends enormously on external non-family resources staying loyal to the King or Queen rather than being loyal to the larger idea of a larger institution.
In my view, having an institutional professional-owned firm is like having a Republic with a rule of law. Republics can throw up imperfect and sub-optimal solutions at times, but having a family firm is like having a monarchy with the rule of man (as opposed to the rule of law), exposed to the frailties of man, who reigns solely by reason of bloodline.
Republics can throw up imperfect and sub-optimal solutions at times, but having a family firm is like having a monarchy with the rule of man (as opposed to the rule of law), exposed to the frailties of man, who reigns solely by reason of bloodline.
PS: Was it a conscious decision to have two women as Managing Partners? Would having MPs in two different locations not dilute the unity JSA was known for and make it like any other national law firm?
SS: It is amazing that the two Managing Partners we all unanimously zeroed in on happen to be women. This is no tokenism for the position of women in JSA. The profession of law is very male-domineered and it is time people realise that inherent in a law firm’s internal workings is the throwing up of
leaders who happen to be women.
I am surprised at the question about MPs from different locations potentially diluting unity. Jyoti had historically always worked out of Gurgaon and Berjis always out of Mumbai.
We are a one-nation-one-firm model and it is a basic constitutional feature of JSA. Dina being located in Mumbai and Shivpriya in Gurgaon, is a feature quite consistent with our locational history.
PS: Any particular reason why you chose not to become, or at least be in the running for, Managing Partner?
SS: There is a time and place for everything. It is not the right time for me to shoulder this responsibility. We are a collegial management unit and I have stepped up to formally join the Executive Committee and will need to make time and spend energy on what that entails. For now, I cannot do justice to any other role, given the other competing demands on my time and energy.
PS: Do you think it’s time to re-think JSA’s policy of sharing a percentage of the transaction with all lawyers who have worked on the transaction?
SS: Not at all. Ours is truly a model of treating everyone as having a share and interest in the interests of the firm. I see no reason anyone in our place would disturb that. Today, every human resource of the firm is like a Partner thanks to this system. Truly, we are a group of lawyers who have come together retaining one another to work for mutual interest and that will not change.
PS: Can you tell us more about the equity division at JSA?
SS: As I have said, our financials, like those of any other firm in India, are confidential. Having said that, we are quite proud of the fact that no one individual owns the firm to the exclusion of others. You can do the math – over 30 equity partners own 100% of the firm’s equity and no single one has any double-digit profit share.
That should give you a picture of the diversified nature of our equity ownership and the equity division. The founder of the firm Jyoti Sagar truly retired, meaning he has zero profit share. It may seem unbelievable but it is true!
PS: As a first generation lawyer, what are the areas that you think Indian law firms need to work on in order to become more professional?
SS: I genuinely believe that Indian law firms have to demutualise (to use regulatory parlance) – segregate ownership from management. So long as a firm is run as a mom-and-pop shop, however large or chic or sophisticated its services may be, it would be exposed to the vagaries of an individual. That simply has to change. Indeed every professional organisation needs strong leadership. But that leader should hold office at the pleasure of the general body that sees value in what he espouses and stands for.
So long as a firm is run as a mom-and-pop shop, however large or chic or sophisticated its services may be, it would be exposed to the vagaries of an individual. That simply has to change.
PS: JSA has some excellent senior partners, who have been groomed and trained by Jyoti and Berjis. What about leadership of creating the next generation especially in terms of market visibility?
SS: As you know, we have a bunch of younger equity partners in the firm, each one of whom is a high quality asset. These are folks who have come up the grind and have made a mark and a name for themselves in the market. They are the future of the firm.
This younger breed holds the promise of the future leadership of the firm. You will see more and more of these partners coming up as future leaders of the firm. I dare say that some of them show a lot more promise than what we would have shown when we were of their age.
PS: Do you believe that the departures of Jyoti and Berjis will change the culture the firm is known for? Berjis, in a recent interview, mentioned that JSA was looking to trim the fat. Has this exercise begun?
SS: To be healthy, one indeed has to trim fat and ensure that one does not consume unhealthy food for too long. This is an ongoing process and we always do that. Now, given that the online media loves to see a trend, if any attorney leaves, we get to read about the “spate of resignations continuing unabated”! So much so, that folks get into the news because it is JSA that they are leaving rather than because of who they are and what they mean to the market place.
As I have said, the whole point in institutionalising a firm is to make it larger than any human being. The rule of law and not the rule of men is what will work in JSA and therefore the core culture cannot change.
PS: What do you believe are the core principles of JSA? What sets it apart from the top 6?
SS: We actually have a list of JSA Values that we have developed, meditating over them over the years and recalibrating them with our experience. There are some defining core values that we strive to maintain. Exceeding client expectations, that people matter and that humility, respect and dignity should always be part of our interactions with people, integrity of our actions, teamwork and collaboration, and valuing intellect and therefore a focus on learning – these features define our values. These values are intrinsic to who we believe we are.
These can sound like motherhood statements and management jargon, but if one meditates on these issues, one finds one’s thoughts focusing on concrete things one can do and specific baby steps one can take in living these values.
On the practical side there are some core features too that have come to define JSA – such as retirement for every Partner, not mixing family with the work place, sharing revenues with every single qualifying attorney, and striving towards a work-life balance. I don’t see these going away in the foreseeable future.
Photo Credit: Santosh Samal
The post “Over 30 equity partners own 100% equity – No one has double-digit profit share” JSA’s Somasekhar
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