Paul Rawlinson, Global Chairman, Baker McKenzie - webcast and Q&A
Todd Benjamin, interviewer (TB): Welcome to this live broadcast from London with the International Bar Association. I’m Todd Benjamin. I encourage you to ask questions during this broadcast. It’s my great pleasure to have with me today Paul Rawlinson. He is the Global Chairman, Baker McKenzie, one of the premier global law firms. Just by way of background, $2.6 billion in revenue, 77 offices across 47 countries, some 4,600 lawyers. Paul has been Chairman since October of 2016.
Let me begin – there’s a lot I want to ask you about innovation, about Brexit, about the Trump presidency, what it may mean for your clients, about diversity. But I want to begin talking about your firm just a bit if we can. What do you see as some of the big challenges in having a global firm like yourself, and where are you putting priorities?
[00:40] PR: So, first of all, great to be here with you, Todd. I’ve just come literally to the end of my first 100 days as Chair of the firm, having been at the firm for 30 years. So through that period I’ve seen a lot of change. I remember when I first joined the firm, joining the East-West Trade Department and seeing the Berlin Wall coming down, and I spent a couple of years in Hong Kong, so I’ve seen a lot of change.
You know, I was pre-handover in Hong Kong, so a different world, and China’s come up, obviously, since then. And so the challenges, when you’re in a global law firm, are to sort of really stay the distance, because markets go up and down, volatility is now, you know, the sort of the norm; but it feels like it’s been that way in Baker McKenzie for a long time, because when you’re in emerging markets, new markets, and even mature markets, with the crash we had not so long ago, you get used to the fact that things go up and down.
Now, the challenges at the moment with changes to the administration here in the UK and, sorry, with Brexit in the UK and changes in administration in the US, is to anticipate, if you like, for clients what that means for them. When I first joined the firm, I don’t think we really were expected to have that sort of real deep sense of business advice and anticipate trends.
But I think now as lawyers our clients are becoming to expect more of that. And certainly my first 100 days, speaking to clients here in London, also in the States and in Asia, this is the message that we’re hearing from clients. So law firms have to respond to that.
TB: So does that mean you need a different type of lawyer?
[02:58] PR: Yes. Let’s call it The New Lawyer. We’re… in Baker McKenzie, we’re trying to create what we have already called The New Lawyer. What’s that mean? It means a lot of things, but it means fundamentally a lawyer who is more adapted to looking at a business opportunity internally but also anticipating business needs of clients.
So how are we going to do that? We’re, first of all, going to be much more sector-focused in our approach, look at industry sectors, make sure our lawyers are equipped to look at trends in sectors, not just get together and talk about the sector in a sort of generic sense, but to really understand the dynamics of a sector. And we’re going to look at our clients through the sector lens, to look at the clients of today and the emerging clients of tomorrow.
We’re going to look at, you know, the way that we deliver legal services in a different way. So the majority of our lawyers are Millennials. If you look at the profile of our associates, we’ve got a good bunch of people who think and act differently to the way that I was trained as a lawyer, embracing the digital age, embracing agile working, flexible working, but being more business-focused, and I think that’s really an exciting place to be in an international environment.
TB: So how would you separate yourself, let’s say, from a McKinsey, for instance, which… you know, they’re also advising on businesses, you’re giving legal advice, but at the end of the day, they’re trying to help you navigate specific situations or seeing trends?
[04:37] PR: Yes, so it’s true. So what we mustn’t forget is that we’re lawyers and excellence in what we do has to drive the way we sort of teach our lawyers, where we train them – we develop people. So we have to be really good. But every client will tell you that if you’re Baker McKenzie or one of our competitors, that’s a given, that you are already invited to the pitch, if you like, as a good lawyer.
And the real differentiation, what clients are really wanting now, is to add that advisory piece on top. And I think as lawyers we’ve often sort of been a bit too shy in talking to our clients about the business, because we see a lot: we see trends, we see regulatory trends, we see different sectors; we’re exposed to the business community.
I’m going to Davos next week for the World Economic Forum, so law firms at the very top of the business community, at the top of the business leaders, is I think, going to be a trend that we’re going to kind of see continuing.
TB: Now, you talked about the trend that you’re seeing in your own business, or how you plan to stay as one of the premier law firms. Let’s talk about some of the specific trends that you’re seeing in certain industries that you think are real game-changers.
[05:56] PR: Right. So we’ve just done a study with Oxford Economics to look at a transactions forecast going out to 2017 and beyond. And just pausing there for a moment, we think this year’s going to be a little slower than last, but picking up, and picking up pace in 2018.
PR: But that’s when you get into the sectors. So if you look at the analysis of where those transactions are going to come from, in the short-term they think it’s the tech sector and the pharma and healthcare sector; energy, mining, infrastructure still a little more sluggish; and then consumer goods and other sectors somewhere in the middle.
And so when we look at the trends in those sectors, what’s driving that, the transactional activity, you then have to dig deeper into the regions, and you look at the Americas, you look at EMEA and you look at Asia-Pacific. And the two sectors I’ve identified are technology and healthcare. A lot happening in the States; obviously, with the Trump administration, it’s going to drive a lot of change there; but also Asia-Pacific, a lot of change in terms of the demographics of healthcare in that region which is going to drive a lot of growth. And that’s where as a law firm we have to adapt to those changes in the sectors and really anticipate what’s coming down the pipe and align our industry leaders to sort of really see those trends.
TB: You mentioned, of course, in your opening remarks, Brexit and, of course, the Trump presidency. Let’s talk about Brexit for a moment, because there’s a lot of uncertainty, certainly for UK firms, around that, and also, actually, for Europe itself.
You know, your thoughts on Brexit and the key questions that clients are asking you, and what can be answered right now and what can’t be answered, or what do you anticipate will happen?
[08:01] PR: Okay. So… yes, and it’s interesting, because when I was elected as Chair, I suddenly… literally, a week or so later Brexit happened, and then my first trip was in the States, and then you had a change of administration with Trump’s election, so it just shows how in 100 days the world has changed and therefore we have to adapt.
So you’re absolutely right, that clients are saying, well, what does it mean: what does it mean for business and so forth? If you look at Brexit, just, first of all, as Baker McKenzie, as I said at the outset, it’s something that we need to look at from a London perspective, but also it’s something that our clients in Asia and other countries are asking us: how’s it impacting them?
We mustn’t look at this as a London issue; it’s a global issue. That’s the first point. And what we noticed since the referendum is, first of all, not a downturn in activity – certainly IPOs are down, but M&A activity as a whole is pretty stable in terms of our book of business in the office here. And what’s driving that is still a lot of cross-border work.
But certainly domestic work, domestic transactions, there’s a pause, there’s uncertainty. If you look at the client base, we’ve seen a very robust response from consumers and we’ve seen a pretty robust response from the FTSE100 and even the FTSE250, who’ve got quite a lot of internationally-based business.
So someone said to me the other day, you know, there’s been a bit of a Brexit party; is it time for the hangover? And I think there will be a hangover; there will be a stage, and I think we’re starting to get into that now as we hear these different messages from the Government about hard and soft Brexit, what does it mean… I think we do need to wait for the clarity of positioning, not just from a UK point of view but from a European point of view, because the big question for me, and where… you know, as Global Chair of the firm, is its impact on the rest of the European Union and the rest of business. The final point, I’d say, is we have seen some positive inward investment because of the strength of the pound, so it’s really the devaluation of the pound.
TB: So if you are in the job of trying to help your clients anticipate what may happen, what is your gut-level feeling in terms of what will happen? How are you telling your clients to position themselves as a result, or are you telling them to take a wait-and-see attitude?
[10:41] PR: I think the latter, and we have to wait and see what policy really means in practice. As lawyers, we need to see the detail as to what that sort of trade agreement looks like, what the customs’ union approach is. These are important framework rule of law issues: you know, what is the basis of our relationship with the European Union? And that does translate into hard specifics of legal treaties and so forth.
Having said that, we do have to look at the prospect of other trade agreements. And we’ve heard only this week from Boris Johnson about, you know, not being at the back of the queue but being at the front of the queue. These are really important issues…
TB: With the US, yes.
PR: Because if that’s a reality, then that is obviously going to impact investment decisions in a really material way. But, again, we have to wait and see what materialises from that.
TB: But five years from now, there will still probably be a certain amount of uncertainty as it still kind of, you know, unfolds. Ten years from now, is it possible that the UK actually could be in a stronger position than it was pre-Brexit?
[11:53 ] PR: I’d like to think so, and I’d like to think the whole of European Union will be in a much more stable place because of all the other issues we’ve had recently with the eurozone. I mean, this is the thing that I find fascinating about the climate we’re in at the moment, that the fundamental economics pretty much right across the globe are in really good shape.
North America’s never been in better shape. I mean, the Obama administration has left a very vibrant US economy which, arguably, doesn’t need a fiscal stimulus, nearly full employment. The European zone is improving; it’s growing; that wasn’t the case until recently. Asia-Pacific is still healthy. Latin America is starting to come back with growth. China is still at 6%, 6.5%; growth is still good. It’s not as... hitting the heights that it was. So we find ourselves, you know, as economists, looking at a very positive picture for the next few years, but the politics of these big economies and the mature economies is what’s... where the uncertainty is.
TB: And then enter Trump policy and the rhetoric that we’re having. What are the key questions your clients are asking you there, and what assumptions are you making? Is it... is the rhetoric stronger than the reality will be, or shall we take what he’s saying at face value and plan from that point?
[13:24] PR: Again, I think we have to take a sort of broad sort of assessment of a benign administration and a more aggressive on the spectrum of the issues that we’ve seen. But I think for business the two key things I think are important for the US are the fiscal policy, what will that mean in terms of tax reductions... If that’s going to be material, that’s a really big, big... going to have a big impact. And the second is deregulation. And then what clients tell us consistently is regulation is not just a cost to business but sometimes stopping us doing business, because of the sort of complexities of regulation. And so if we get a US economy which is liberated from some of the, arguably, over-regulation which we’ve had, and, secondly, a fiscal stimulus that is really material, then that produces a very fertile sort of investment opportunity for clients both in the United States and investing in.
Now, the other side to it is the international trade angle and the protectionism and what that will mean and so forth. And even there we’re already seeing, you know, on the one hand, how can you sort of trade that off with what we’re hearing from, you know, about the Bilateral Trade Agreement with the UK. I mean, is this...? I don’t think trade agreements are off the agenda, so I think there’s quite a lot of rhetoric there, but I think we’re going to have to see what happens with NAFTA. We already know that the TPP is largely. What’s going to replace it, if anything? So that’s the bigger area of uncertainty. I think for the US economy, I think we heard this week that the consumer confidence in the US economy has never been higher, and certainly the stock market reflects that.
TB: But in terms of protectionist rhetoric, for instance, this idea of an import tax, could be quite devastating for a lot of companies. How are you advising your clients? And you can’t really advise, I realise, until you know what’s on the table, but they have to be extremely nervous. What are the type of key questions your clients are asking you right now?
[15:43] PR: So I think we’re still in the days of let’s-wait-and-see, because the questions are as broad as: is it going to happen at all, is it going to impact certain sectors rather than others? So I think that, and I come back to the sector approach, for some of our clients, when you’re talking to them, they will wait and see. The regulated industries are, I think, the ones that are finding it most difficult to see what, how this will all unfold, because it’s a very different landscape when you combine protectionism with deregulation. And there are pros and cons of these approaches, which are sort of... clients are finding it difficult to navigate through. So I think we really do have to wait and see what sort of trade policy really emerges over the first six months.
TB: Let’s talk about China, because, obviously, you know, Trump said a lot about China; the Chinese have to be very nervous about the type of rhetoric that he’s using, be it currency manipulators and so on and so forth. You have opened an office with a Chinese partner.
TB: How could that be impacted – negatively or positively – by a Trump presidency? And what are the opportunities you see in China, and could they be potentially derailed, to a certain extent, if Trump makes good on his rhetoric?
[17:18] PR: Right. So let me give you just a bit of a profile of what we’re all about in China, because there’s an interesting question in itself about our practice there and how we’ve come to this arrangements with the joint venture that you’re talking about. So not untypically for Baker McKenzie, we were Licence Number 001 in China when we were first allowed to practise there. And that was in the 90s. And we already have a presence.
What this joint venture vehicle gave us is, through the Free Trade Zone, to have a licence to practice Chinese law in China right across our office network, which is a game-changer for us, because prior to that the Chinese law firms that were growing up really had it all to themselves.
The second thing that’s happening is the appetite for Chinese companies to invest overseas. So the international law firm dynamic becomes more important for them. So that... the reason for explaining that is that the business opportunity for us was broadened by virtue of being able to practise Chinese law, and so that we’re now competing head-on with Chinese companies who themselves are looking for ways in which they can advise Chinese clients in an outbound fashion. So what we’re seeing in China is more opportunity for us. The only real thing we’ve advised on so far is this notion of China itself regulating outbound work for deals over a certain size. I think 10 billion was the figure that was given, or 1 billion where the investment opportunity was in sectors that that company wasn’t already in.
So will there be a reduction in outbound investment work from China because of Trump or because of concerns about any of this protectionism rising? I don’t see it, as Chinese companies are being very successful and they’ve got a track record of not only investing overseas but making companies survive and prosper. So I think the idea that China is there to somehow, you know, as some sort of rogue trader almost is the way that the Trump administration would characterise it, is completely flawed, I think. The China outbound investment that we’ve seen has been very successful, and I don’t see that letting up. So, personally, I see this as more rhetoric, but we have to see whether the broad geopolitical relationships with the US and the European Union and China, how that develops; and obviously Russia is the other big one.
TB: And on Russia?
[20:20] PR: Again, complicated. We have to see what the European Union’s response is to its relationship with Russia, but I would hope that all these things become a little bit more restrained in the sort of policy development as people get to do business.
TB: I think one thing that is clear about the Trump administration, the type of people he’s putting in his Cabinet, it will be - and Trump himself – it will be very transactional as opposed to strategic, and that’s a very different mindset.
[20:49] PR: Yes, so the notion of intervening on specific deals is not scalable. I mean, obviously it’s politically interesting at the moment to see what’s happening with Ford or General Motors or So-and-So, but the administration itself needs to know what the policy is once you get into government and start looking at, you know, dealing with the scalability of those policies that are starting to sort of get articulated.
TB: Now, of course, because you were Chairman, for several years you headed the firm’s IP practices, Intellectual Property Practice. And it’s a fascinating area because you are actually at the cutting edge of innovation or variations on innovation. And you talked about in the beginning about this need to anticipate trends for your clients and that you have a lot of Millennials and therefore they’re much more engaged in digitalisation and disruptive technology. And we are at a fourth Industrial Revolution right now when it comes to disruptive technology. What are some of the questions that clients are asking you in terms of future trends, in terms of technology, and where do you think those trends will be?
[22:09] PR: Right. Well, I think if you look at law and technology and what’s happening now, for us this is a continuation but also an acceleration of what we’ve seen. Just a little story about my own involvement as the Global IP Practice Group Leader: about ten years ago a client, you know, a major client came to us and said, we’re like you to handle our IP portfolio; it’s our biggest asset on our books, but we need to... you need to have... we need to have confidence in you that you’ve got the platform to do it. You’ve got the people, but can you make it work?
And we invested in technology, we invested in systems, we invested in tools that allowed that client not only to have reassurance that we could manage the business, that we could also slice and dice the data that we had at our fingertips to be able to help them make better business decisions. And that relationship is now ten years old and we’ve sold that similar service to lots of other clients.
Now, the reason I tell that story is because it’s really a combination of expertise on the ground, knitted together by really smart technology, that is, I think, what is driving a lot of this change now. And it’s accelerating because technology’s getting faster and better. We have data analytics, we have artificial intelligence coming, and we have a lot of demand from clients to do more for less. So you put all those things together and I think what clients are expecting law firms to do is to embrace that technology to be more efficient but also, and coming back to where we started, being able to help them forecast, better manage their affairs, analyse their matters for them, and really understand how we can help them manage their business better. That is the opportunity and that is directionally where we’re heading.
TB: In terms of the trends that you’re seeing in technology, I want to talk about, specifically in legal services at the moment, but just in general, as somebody who’s interested in this type of thing, you know, where do you see those major trends and how do you see them evolving?
[24:26] PR: So a lot of talk about artificial intelligence and what that means. I think the basic view at the moment is that’s still a little way off becoming the transformational sort of tool that, whether it’s law or anywhere else, is going to really shake up business models in a more fundamental way. I think the first stage is looking at that in the next two to five years, but at the moment embracing digitalisation and data analytics so that you really have the best tools to make the most robust business decisions. So when we talk about an industry sector, getting the data that’s driving all the different industry players, getting the actual, real, sort of granular detail around that and being able to make forecasts on a much more sort of reliable basis is, I think, the first phase. For us as a law firm, it’s about really getting smart at global solutions, whether it’s our finance system, our matter management system, but also in client-facing tools.
We have partners who have quite a lot of the information they need to advise clients on certain apps in certain industry sectors, so if you ask me a question about can you ask me a question about a pharmaceutical regulatory issue in Asia-Pacific, I can pump in a question on my app and up pops the answer. So that’s information that is at your fingertips, and clients expect to have that sort of information, if not on our hourly rate then, or a subscription rate, then maybe even free. So that side of the business is already here and digitalisation helps the process of managing knowledge for the benefit of clients. I think it also means that we’ll shift our business model to having different types of lawyers - we already have that: we’ve opened up in Belfast, we’ve had Manila for a long time – to look at different ways in which our lawyers service clients and our non-lawyers and our professional support staff can help that. Project managers is another area that we’re investing in, just as an illustration of that.
TB: Also, I think that, you know, outsourcing...
TB: ...cloud services, fintech, those are all areas that you’re involved in. Can you speak to those just for a moment, because those are very important parts of your IT evolution?
[27:01] PR: Sure. So, again, they’re all areas where we have industry approach, so fintech, we have our Financial Institutions Group that looks... we’ve got regular discussions around what sort of business opportunities there are for us and what tools that we need to adapt internally to sort of embrace that change. Cloud services, all these areas, are areas that we’re looking at as an innovation team. So under my chairmanship, the new leadership team has set up a taskforce with an innovation group that’s looking at artificial intelligence, machine-learning, data analytics, fintech, different sector approaches. We’re getting some external input from people who have really done this in different industries, to help us understand what it is we need to be looking at. So we will be actually getting some external advice on how we can really adapt our business model with these new technologies coming down the pipe.
TB: You mentioned data more than once here; and with algorithms and so on and so forth, I mean, we’re collecting more and more data. The technology of data is not the real challenge. It’s the interpretation of that data.
TB: And do you see yourselves playing a greater role in how you interpret that data or the right questions to ask?
[29:02] PR: Yes, it’s the interpretation. I think the... you know, when you look at the, you know, where is this going to end up, a lot of the questions and the sort of commodity work that we see today will be done by machine-learning over a certain period of time. But what will always be valuable, I think, is the human intervention of evaluation and looking at experts, looking at the data through the lens of experienced industry sectors and different sort of practice areas that we have in the firm. So I think it is interpretation, expertise, interpretation, relaying that to clients in an effective and easily digestible way.
TB: You talked about artificial intelligence; you think its broader application is still a ways off, is what you suggested. You recently conducted a global survey called Ghosts in the Machine: Artificial Intelligence, Risks and Regulation in Financial Markets, which investigated the potential benefits and risks of the automation of financial services. What was most surprising in that survey to you? What really stood out?
[29:45] PR: Well, I think with all these issues of, you know, do you trust the machine, it comes with legal ramifications: what happens if the machine gets it wrong, who’s going to pay, where are the liabilities? And that’s a fascinating area as a lawyer, right? The driverless car is the example everyone talks about: when you knock someone over, who’s to blame, the machine or the driver? Now, that’s an interesting legal topic, but the real issue is trust, because at the end of the day I think there’ll still be the human interface that’s needed, even if the machine gets it right more often than the human. Our human instinct is to want to speak to a human, and I don’t think that fundamentally will change as long as we’re all wired in fundamentally the same way. And there was something I picked up last week about the UK changing some of the lesser criminal offences to online processes, and everyone’s up in arms saying, I just need my day in front of the magistrate because I need to know that someone has thought about this. So the fascination for me and the surprise for... not a surprise, but the, I guess, the reassurance for me is that there is this interface between the machine-learning piece and the human intervention and where you draw that line.
TB: One of the things that was very interesting in this survey, though, is that you conclude that people perceived AI to be useful for conducting risk management for business, i.e. more in-depth assessment of risk in portfolios and more incisive, comprehensive and informed credit risk assessment.
TB: But at the same time, the participants in that survey of a clear 424 senior executives from financial institutions and fintech companies around the world, they’ve raised concerns of the uncertainty and lack of testing of AI and the risk that regulators lack adequate knowledge and skills to stay abreast of developing technology. And we certainly have known that from the financial crisis, you know.
[31:52] PR: Yes, absolutely. And we’re having this debate internally about, you know, if the machine-learning can do the job of a paralegal today or tomorrow, where are the paralegals of tomorrow going to come from? Where... how are you going to train your people in investing in that knowledge that you need to be able to do the sort of, the more sophisticated stuff later down the track? And how are we going to manage that interface between the two? And I think this is the area of fascination for me, that there should always be a place for both the human intervention and the machine, but I think we’re still, as I say, quite a way off before we’re about to sort of declare ourselves the victim of machines.
TB: We’ve had some questions come in here. One is on emerging markets; of course, you’re in several of them. What emerging markets are you particularly targeting, and to what extent have Baker McKenzie cracked Africa?
[32:50] TB: Great question. Every law firm wants to be in India, clearly. We’re looking very closely at India, as is everybody, but we’ll see what happens there. I’ve been quite closely associated with Africa, as in my former role as Managing Partner of London, we opened our Johannesburg office, so I spent quite a bit of time looking not just at that office but at the region. And Africa is definitely something we are looking at. At the moment, we have three offices in Africa, but we’re looking to really understand the markets in Africa, not just in the sort of traditional EMI area, but other industries as they develop: healthcare and consumer goods, in particular. So Africa we can really sort of look at as a region, and I think we’ll be interested to see how that develops. Clients really drive this for us. Clients are saying to us, you know, how we’re serving them well and where they see opportunities for us to sort of work with them in the future, and Africa is coming up increasingly.
TB: Yes. Early in this interview we talked about how you see lawyers’ roles changing in terms of becoming more advisors, not in the traditional sense but more in terms of spotting trends and so on and so forth. This question is on legal services: how will multinational accounting firms’ increased focus on legal services affect the legal market?
[34:20] PR: Well, they’re a competitive threat no doubt. They’re... in the 90s we saw a different wave of the Big Four or more of them then in terms of looking at legal services, and now they’ve recently come into the market in a slightly different way. I think it would be foolish not to think of the Big Four as a competitive threat. They have complementary consulting, audit and tax advisory functions that need legal services, so I can see why they would think it was a natural bolt-on. I don’t think they’re doing it at this stage in a sense that they’re trying to be all things to all people but doing it in a way which is, as I understand it, more strategic to their business venture. And law firms have to look at not just them but the competitive threats in the legal market, with alternative legal providers and so forth. So I think it’s a much more diverse place to access your legal advice in today’s market, and I think there is a place for global law firms, there’s a place for more sort of specialist firms, and there’s a place for consultancy and advisory services having legal arms to them. So I think that’s definitely a competitive threat for us.
TB: What do you think over the next five to ten years, in terms of legal services, will be the biggest trend?
[35:53] PR: So I think, for us, we see the increasing consolidation of the legal market as gathering pace. And what I mean by that is there will be a position where unless you’re clear in what your proposition is, then the client’s not... is going to go elsewhere. So I think you have to be clear about what you do, whether you’re a global law firm or a boutique firm or a service provider in a different part of the market, but be clear in your proposition. And I think the evolution, like all sectors, is to consolidation and segmentation, and I think we’re starting to see an acceleration of that in the last few years, since the recession certainly, that clients have been pushing for getting more competitive with their demands of legal providers. And I think we need to sort of be realistic in that the legal market has not had that sort of transformational change the same way that other industries have. I think that will gather momentum.
TB: And even though you’re one of the premier global law firms, your own model continues to evolve, correct?
TB: Where do you see that evolvement most pronounced?
[37:15] PR: So I see the industry focus as being a real investment for us, that we will have much greater clarity for every lawyer who comes in to be, in this new lawyer concept, to be an industry lawyer, to have a real, good, solid practice base and expertise, but to be really industry-focused. And I see the continued development of the delivery of legal services in a much more cost-effective way, using technology, using alternative resourcing, using project managers, to really professionalise the degree to which we serve our clients right across the board.
PR: Pay – yes, well, there’s still a war for talent and we need to absolutely be competitive with the pay that you offer talent. I mean, young people coming into the legal profession will have choices: should I go into the legal profession? It has to be a venture that is as appealing as it was. I think lawyers fundamentally have something about the appeal of the law and the practise of law that brings them to the profession. So I think it will always have that sort of person who has something, some interest in the law and the practise of law, to get interested in joining a firm like Baker McKenzie. But I think our people want to be paid competitively, but I think they also want flexibility; they want agile working; they want to be in a law firm that offer career opportunities and international opportunities. And I think that’s where we really do have a lot to offer in terms of the people coming into the profession.
TB: And if my memory serves me correctly, your retention rate amongst associates is 88%. That’s quite high.
PR: Are you quoting...? Yes, we do have a good retention rate.
TB: Is that correct or incorrect, the...?
PR: I’m going to have to sort of defer to what particular...
TB: What [overtalking]... yes.
[39:15] PR: Yes. No, we have got a good track record in retention. I think there’s a number of reasons for that. I think one of the things that we haven’t really talked about is law firm culture, and different law firms have different cultures. Whilst... again, this is something that evolves. The culture of the firm is something which is quite unique. And the reason it’s unique is because of the way we’ve evolved, the way we’ve evolved over a long period of time, spending a lot of time and investment in working together, in getting together, particularly as a partnership team – we still meet regularly as partners at practice group level, at global and regional level – and that comes across to clients. So when you get the sort of client feedback, they say, you know, we do like working with Baker McKenzie because you really do feel like you’re working with one team. Now, I know that’s a bit clichéd, but there is a sense that we know each other as partners and as associates; increasingly, there’s mobility between our facilities. And for me, the special ingredient is when that translates into excellence in client service, because the clients have a comfort level in liaising not just with the senior partner but with all the other people on the team. And that’s what I think is quite special about the firm.
TB: Some more questions have come in. You were talking about emerging markets a moment ago. In terms of new offices, why has Baker McKenzie opened a new office in Myanmar? And are there any new jurisdictions where you’re considering opening offices? That’s the first question, and there are two others.
[41:00] PR: So Myanmar’s a good example of a client-driven approach. We have a number of global key clients who are investing in Asia and starting to ask us about countries like Myanmar, and we took a decision as the market opened up there to sort of move into that jurisdiction. And that’s been quite a typical Baker McKenzie response to client need, to looking at where our clients are going around the world. Having said that, we’re going to take a strategic look at our markets, going forward, because we really want to be sure that the dynamics are right for us. I talked about looking at our client base through an industry lens and looking at the markets of the future, the clients of the future. We’ve got to look out more than a short-term opportunity, to a medium-, long-term vision of what Baker McKenzie should look like in 2020 and beyond. And so I think there will be probably some more markets we’ll look at, but I don’t have any to share with you today.
TB: Two other questions here, one on cybersecurity and one on general counsel. Let’s take the cybersecurity question first. The Chairman of the UK National Cyber Management Centre warned this week that: a major bank will fail as a result of a cyberattack in 2017, leading to a loss of confidence and a run on that bank. How likely do you think that is? And, of course, hacking is certainly in the news quite a bit.
[42:32] PR: Sure. Well, I think next to natural disaster and terrorism, I think cybersecurity is probably one of the biggest business risks for any business. Banks have, obviously, a lot of sensitive information and so forth, and I think, obviously, feel, and rightly so, vulnerable to attack. But I don’t think it’s unique to the banking sector; I think all sectors, including the legal sector, needs to be very wary of that as a business risk, and we’re certainly taking a sort of a very robust approach to that as a topic, as well as data protection and security of data, as well as... Yes.
TB: And general counsel, of course general counsels always want you as big firms to be more competitive in your pricing, but what are the biggest challenges facing general counsels, do you think, and in-house legal teams? And there is more being done in-house, you know.
[43:33] PR: Absolutely. And what I like about the environment we’re in now is that working closely with general counsel and their teams has changed dramatically. So when you have a general counsel that has an in-house team that you work with really well, the power of both and how that translates into a real working partnership really makes that a special relationship, and that’s what we’re trying to nurture with our global clients. The challenges for general counsel are always this issue of being an advisor to the Board but also, you know, looking at managing the team and being stretched in different directions. How do you do that? And also they’re struggling with the same issues that law firms are struggling with: managing their talent, getting the best talent for them, managing global teams. So quite a lot of the time we’re working with general counsel on the same issues that we are as chairman and as managing partner and practice group leader; we’re trying to work closely with clients to see how we can help with those issues alongside them. And there are some really good stories there. I mean, we’ve... last month I spent a day in Belfast with general counsel and the team there looking at how we are approaching innovation, how we’re approaching delivery of legal services differently so that they could take some of those learnings back to their team and also understand a little bit more about where we’re coming from. So that’s quite common.
TB: Let me ask you about diversity, specifically gender, female partners. Now, you have an aspirational target to increase percentage of female equity partners to at least 30%, the percentage of female junior equity partners to 40%, and for 30% leadership roles in the firm to be held by women. How are you going to achieve this and by when? And why has it taken even so long to get the numbers that you’re talking about?
[45:44] PR: That’s a great question, and I hark back probably three and a half plus years ago on Day One of Managing Partner. I was invited to attend the 30% Club’s Professional Services meeting. And as Managing Partner, I suddenly really sort of understood the responsibility of taking diversity and inclusion, you know, as a management responsibility. And I think I was one of half a dozen men in the room of 200-plus women. And the first thing I’d say is that it’s now not just a women’s issue; it’s a business issue. All our partners and staff take it very seriously; it’s at the cornerstone of our strategy. And, you know, the 30% Club – I think you’re familiar with what they do, trying to get 30% of females on boards of UK companies...
TB: Mervyn Davies’...
PR: Yes, Mervyn Davies’ project. And it’s just an illustration of the UK piece. Of course, we’re a global organisation, and diversity and inclusion has its place in all aspects of our business overseas, but just to use the UK as an example. Roll that clock on three years to when I sort of finished my term as Managing Partner. There was a different agenda, and it was a business agenda, it was roughly 50% of men in the room. The data we had as to what’s going on in these organisations, why there’s this sluggishness, what do we need to do to improve the position, with sponsorship, with, you know, diversity training, with unconscious bias training. And I think there is so much more that we are doing; it’s just going to take time, we have to be a little bit patient...
PR: ...for that to play through. Well...
TB: We’re in the 21st century.
[47:38] PR: Well, because... yes, absolutely, and I wish I could say that it was quicker. We don’t have a target date, but we do have a real sort of sense of accountability and responsibility to each other to make those improvements.
TB: You were talking about how Millennials want more flexibility. You know, you talked about it in terms of work...
TB: ...but I think, generally, you know, quality of life is also important to certain people, maybe not to the extent in the legal profession as maybe in other professions which may not be as 24/7 sometimes or transactionally oriented. But nevertheless people want to be able to have a very meaningful career and have families as well. And for a lot of women, this is hugely challenging, because what often happens is, as you know, they get their law degree, they work very hard, they move up, and then they take time out to have children, and then it’s very challenging sometimes to get back on track. Can you see a place for just part-time partners...?
TB: How do you think that will work practically, and can it only work in certain types of industry practices?
PR: Well, again, speaking, as I know it most closely, the UK position here, we do have part-time partners in the London office, part-time female partners...
TB: And part-time means what: three days a week...?
PR: Yes, it can be three, four days; it can be sort of different sort of flex-times, different working hours of the working day and so forth. Flexible working is obviously male and female, and, indeed, part-time working can be male and female. I mean, as a father myself, I work from home when I can, I try and spend time with the family when I can; these things are not just a female issue. But recognising your point, there is, first of all, a partnership aspiration issue. We find, not just our firm but other firms, find that more male partners aspire to be... sorry, male associates aspire to be partners than female. We need to look at why that is, what’s going on. We are making progress; I mean, 40% of our female partners globally last year were female. So we are seeing the pipeline improving...
TB: You’re talking about new partners?
[50:05] PR: So I think what we need to do is to make sure that our pipeline coming through does have this diversity to meet these targets and beyond. And to do that, we need to sort of get more granular about very specific individuals, what we can do to help make sure that they get the support, the sponsorship and the training and awareness and client opportunities to give it the best possible shot. But I think also, you know, I think we should say the point that men are facing this issue as well, that the Millennials across the board want, we all want, diversity in our lives; we all like to have a social life and a family life. And I think there is a changing culture that this is the new lawyer, right, as I said when I started this interview. I think we... it’s not... it’s synonymous with hard work. I think it’s a myth to say that this is somehow a softer approach. People are prepared to work very hard but they want to make sure that the firm gives them back, and giving back means different things to different people.
TB: Talking about giving back, two final questions here before we wrap this up, one on CSR, Corporate Social Responsibility: does CSR come into play when you’re selecting new clients? This is a question from one of our viewers.
PR: Selecting new clients?
[52:11] PR: It tends to come up in the reverse, in that clients ask us: what are you doing on CSR? And we’ve made it a pillar of our strategy; we’ve had a great history in CSR. I think the interesting thing now is that we’re working on global projects with the United Nations - on Street Youth Programme, for example – to really engage in a project that’s meaningful globally as well as all our offices being able to sort of feed in expertise. That’s when it’s really exciting. But we also have lots of community projects. So I think the answer to the question is: it tends to be more that it’s a requirement of clients, as is your diversity and inclusion approach, your approach to how you train your lawyers, and all those other topics.
TB: Outside of conflict of interest here, are... would there be a certain client you’d say, no, we don’t want to deal with you?
[52:17] PR: I think we’re agnostic as to sector. We would call out ethical issues as we see them, whether it’s a current client or a new client; and I think we have to be robust. We have... I think we’re the, if not the only, certainly one of the first firms, to have adopted a global Code of Conduct for Ethics, which we take very seriously. It’s mandated training for all our people. We have a Risk Committee and a Conduct Committee that takes that very seriously. And without your ethics and without your integrity, you’re nothing as a lawyer, so we do hold that in very high place in our value system.
TB: Earlier you talked about what certain people find very attractive about the law. What attracted you to the law? Why are you so passionate about it? And what’s the most significant or memorable IP trademark case you’ve been involved in?
[53:06] PR: Great question. I’d like to say that I was, you know, interested in law from a toddler, but I wasn’t, actually. I grew into the law through having an interest in international field, and I was... did an English and French Law degree because I wanted to retain an element of international. And when I started interviewing, I interviewed with a number of law firms and I did training in one or two, and I was like, hmm, not quite sure, and then I... and this is a true story. Then I interviewed at the firm, and I thought, this is a different approach; this is an international... I like this; this is an international approach. And it was the only real game in town for international work at the time. This is going back to the late 80s. So I grew into it as part of being interested in the international field, having lots of connections with France, and... as I did an English and French Law, went to Hong Kong for two years, and so really embraced that international concept. And I think, you know, that’s really why I’ve sort of flourished in the firm, because it fitted my perspective on the international environment. My favourite case probably has to be the one that changed the law of Unfair Competition in Europe. It was a case for Lancôme against Bellure which went to the European Court of Justice, and it was a heavily fought case. But as a lawyer, what you try and do is influence legal change in the market, and that was a really fascinating case, and we involved fragrances, so there was a lot of intrigue in the office around the products and services that were in issue at the time. So that would go down as my favourite.
TB: And the main issue on that was how close something was associated? Or what was the main issue on that?
[55:15] PR: Yes, it was all about... you know, in English law we had this concept of Unfair Competition, but you had to prove confusion. And in this case, there was no confusion because there was a different price-point in the products, but they were imitating the brand in a way which took away their reputation and goodwill; so it’s called a dilution case. And dilution was not recognised in England in that way, and as a result of that case, not only was it in England but it also changed trademark law right across the European Union – when we were still members.
TB: Paul Rawlinson, Global Chairman of Baker McKenzie, thank you so much. Best of luck...
PR: Thank you.
TB: ...in your new role.
PR: Thank you. And thank you very much for listening. I’m Todd Benjamin. You’ve been listening live from the IBA headquarters here in London.