19 July 2005

Law firm transformation

Financial Mail

Windsor-Fortune Thekiso is a young senior associate in the corporate division of Bowman Gilfillan, a large law firm. He is one of a breed of new black attorneys groomed by law firms as they push plans to transform a traditionally white profession.

Thekiso is a big asset to Bowman's. But he's in demand and admits that he is approached regularly to take up jobs elsewhere. "It can be tough when you first join a firm," he says. "There may be cultural misunderstandings and a perception that black lawyers aren't up to the job, especially in the commercial arena."

Though transformation of the judiciary has hit the headlines, there has been little focus on what is happening at attorney level. Yet law firms are a key link in broader transformation of the justice system because they provide briefs to advocates, who in turn become judges.

The slow pace of transformation in law firms (see table) has been blamed on a lack of overall strategy at national level, both at the Law Society, a statutory body which regulates attorneys, and in government, which has focused more on the judiciary.

law-firm-transformation-percentage

The profession is made up of a few large, established law firms, and thousands of small practices. "Choosing a transformation strategy that suits all these is a nightmare," says the Gauteng Law Council chair Michael de Broglio.

The two main black lawyers' groups, the Black Lawyers' Association and the National Association of Democratic Lawyers (Nadel), now make up 50% of provincial law councils, more than their proportion of members. But what makes transforming legal firms more difficult than changing the racial profile of corporate SA is that regulations say law firm owners must be admitted attorneys.

"It's transformation in its purest form," says Deneys Reitz chairman Michael Hart. "You can't have a bank, a financier, or empowerment group simply acquiring a financial interest."

But increasing the number of black lawyers at senior level takes time - about seven years to equip a candidate attorney with the experience and skill necessary at partnership level.

"Because there is joint and several liability, partners have to be of the right calibre," says Webber Wentzel senior partner Edward Southey. He says it's encouraging that there are far more black candidate attorneys, associates and senior associates likely to become partners over the next decade.

But the profession is underpinned by strong traditional hierarchies and a pyramid structure in which senior lawyers pull in work and hand it down to lower levels.

"The model is fragile," says Bowman Gilfillan CEO Leon Kruger. "Good partners need to train and coach junior lawyers."

He says fast-tracking young lawyers en masse is not sustainable.

At the same time, competitive pressures are huge. Young black talent is poached by other law firms or by corporates that can afford to pay far more.

"We wouldn't wait seven years if we found a young attorney who showed partnership material," says Hofmeyr chairman Dines Gihwala. "The old hierarchies have to go or your talent will be poached."

Some firms, such as Werksmans, are giving black directors additional voting rights. The Werksmans board resolved recently that at director and shareholder level, black directors, though they comprise only 4%, should exercise a minimum 30% of the total votes held. "It's a temporary solution," says Werksmans chair Des Williams.

Cliffe Dekker chairman Chris Ewing says loaded voting rights are "against the spirit of broad-based empowerment". Cliffe Dekker has opted for one shareholder, one vote, with the same economic interests per share.

Other countries, such as the UK, are considering changing regulations to allow investors other than attorneys in law firms. Hybrid firms such as Edward Nathan certainly have more flexibility in changing their ownership.

But it's unlikely that other firms will split their litigation and advisory services to make it easier to beef up their empowerment statistics.

Mergers between smaller black firms now winning parastatal and government business and older white firms may still be one of the best ways to increase the number of black partners quickly. Hofmeyr seemed to achieve this when, in 1997, Cape-based black law firm Gihwala joined the mainly white Afrikaans firm.

"Historically we were at opposite ends of the spectrum, but the culture has changed at all levels," Gihwala says. "When I tell the white partners to jump, they ask how high."

By Jacqui Pile

Financial Mail
01 July 2005

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