Since becoming the first law firm to list on the ASX in May last year, Slater & Gordon has established a reputation as a firm that thinks outside the box. Managing director Andrew Grech spoke to Zoe Lyon about the decision to list and the future of the firm.
How did the idea of listing on the ASX develop?
We first started thinking about it in 2001, when there was talk of pursuing the idea of harmonising the laws regulating the legal profession. The New South Wales model quickly became the preferred model which allowed for the incorporation of legal practices, and most importantly in this context, external ownership of law firms.
At the time, a journalist asked us whether the proposed changes would allow law firms to float. We concluded that a law firm could float, though we didn't think any more of it for some time.
One of the issues in the back of my mind was the need to be able to reward non-legal practitioners and one of the options was to include them in ownership - but that wasn't available to us under the old legal practice regime.
The idea progressed as we were experiencing quite substantial growth, and we needed to find a way of funding that growth. The traditional law firm model involves raising capital from existing people within the business - internal ownership and debt. But we thought that we should look at external ownership as part of that mix.
Once you decided you wanted to list the firm, what sort of preparation did you have to do?
We made a decision in around 2005-06 to keep the option open. We were concerned about what the reaction of our staff, our clients and the wider profession would be.
So we got external advice and started consulting early on with the various stakeholder groups - the ASX, ASIC, our clients and our staff - to get a bit of a feeling for how these concerns could be resolved and how incorporation could be achieved, before having committed ourselves wholly to the idea.
What concerns did people have?
A number of our staff had the feeling: "Am I ever going to get a chance to be an owner in the partnership?" and "Is this going to open up opportunity for me or close it down?" To say that these were just "personal concerns" doesn't do them justice. Their concerns were really about the firm and its future.
They were worried about what it meant to the firm's values. If this marked some seismic shift in the values of the firm, was this a place they really wanted to work? It was a matter of really trying to explain why this was a good thing. Obviously as a group of owners we thought it was a great thing for growth and the basic driver was for us to create an environment where the possibilities or opportunities were opened up, not just for us, but for the wider group in the firm. So far that's certainly what's happened.
Have you been happy with the firm's performance since it listed?
Yes. There's always room for improvement but we are certainly very pleased with our results to date. We were very pleased to start our life as a publicly listed company exceeding our forecasts and we're going to keep trying our best to keep doing that.
The firm has an overriding duty to the court and to its clients. How have you been able to balance this duty with the duty that you've now got to shareholders?
In all ownership structures, whether they're internal or external ownership structures, there are the potential for conflicts to arise. There's nothing in essence new about that, but I think law firms and lawyers have generally been very good over time in balancing those competing interests.
Having external owners adds a new dimension to that but, in practice, we haven't actually found that any problems have arisen so far.
It's still relatively early days, but we've certainly already done some things structurally in terms of what's in our constitution, in our prospectus and in our policy documents.
I think more important is having an independent chair and an independent non-executive director. There's a high level of emphasis on governance and their independence and their custodianship of those duties is very important to them, as well as to the legal practitioner directors. There would be some pretty serious repercussions for the firm but also for the legal practitioner directors if we breached those duties.
Personal injuries have traditionally been the main focus of the firm. How did the legislative changes in 2002 affect the type of work the firm does in this area?
The legislative changes have first and foremost had a dramatic impact on the rights of injured people and that's a bad thing. One of the impacts of this is that less people have desirable claims and that translates into less need for lawyers to act for them.
What we've experienced, though, is that this has basically settled down since the changes in 2002. The changes are not homogenous so they're different in different states in different practice areas. They're very complex and so personal injuries law is now is one of the most complex areas of the law that you can work in.
What that's meant is that clients want to go to specialist lawyers. A lot of lawyers who perhaps dabbled in the area are finding that it's just too difficult for them to keep up to date and too risky for them, too.
Will the firm be broadening into other areas?
Yes. I certainly think that we will continue to meet demands for legal help in the personal injuries area and I expect the consequence of that will be a growth in those areas of practice. But we're also expanding our expertise in business law, particularly the small investors and small- to medium-sized enterprises.
Commercial litigation is growing very rapidly from a relatively low base, as is building what we call "private client services" - family law, wills, estates, conveyancing and property law. There's a great need for those services, and there's a great need for a firm that can actually provide [those services], so we're tapping into a very deep resource base. I think that's going to be one of the really exciting aspects of the firm's growth over the next few years.
