US law firm Shearman & Sterling recently announced that it was appointing Whitney Pidot to be its new managing partner for Asia, based in Singapore. Pidot is the ex-managing partner for the firm worldwide and his appointment is a sign that Shearman & Sterling is taking its practice seriously in Asia.
For the past decade the firm has focused on expanding out of the narrow confines of pure US securities law, with a localization policy, initially in Europe and more recently in Asia. For instance, in Singapore last year it established a joint law venture with local firm Stamford, which is headed by Lee Suet Fern, one of the most impressive and best connected lawyers in the country. However, recent global firings at Shearman one of the few times in its history that such redundancies have been made have called the firm's strategy into question. Here, Pidot talks to FinanceAsia about his plans for the firm's Asian franchise.
Broadly, what are you plans for Shearman & Sterling in Asia?
The executive group of Shearman & Sterling worldwide, which consists of four partners including myself, wants to put more focus on Asia than we have in the past. We're now in Hong Kong, Singapore, Beijing and Tokyo and doing a number of deals in countries where we don't have offices. The theory behind my coming out here is to have a member of the executive group in the Asian time zone. This will allow us to make management decisions on the ground. This will give us a better understanding of the problems in Asia and see where the opportunities are. Whereas in the past decade we have been focusing on European development, the present decade will see us focus more on Asia.
Why are you located in Singapore and not in Hong Kong or Tokyo?
One of the reasons why I'm in Singapore overseeing Asia is because we have this very successful but very new joint law venture here. So it seemed a good place to oversee the region. It's something of a counterpoint to our traditional base in Hong Kong, which is where Ed Turner, our former head of Asia still sits. We did not have someone of comparable lifetime Shearman & Sterling experience in Singapore.
I view my tenure here as lasting three to five years and during that time we'll expand our Singapore practice into areas we are not in yet. One of the things we're about to introduce is a global arbitration practice here using Singapore as a nexus. We plan to introduce that to Hong Kong as well. In the short to medium term, I am also looking to bring on more Japanese lawyers in a joint enterprise in our Tokyo office. Eventually we also hope to bring in more local expertise to complement our US and UK expertise in Hong Kong. And in China, hopefully not too long from now, the People's Republic will let us open a fully fledged office in Shanghai. At present we have 80-90 lawyers in Asia. In three to five years I would not be surprised if we were up to 300 lawyers here.
In order to do that you will presumably be taking on different areas of work from what you have traditionally been known for. Does that include more local legal work as well as acting more for local companies on top of the investment banks for whom you have traditionally worked?
We are looking to get a profound level of expertise on the ground in Singapore, Hong Kong, Tokyo and - if the rules permit - in China. Although the traditional New York firms have been identified with the Wall Street investment banks and commercial banks, today our practice in Hong Kong is 80% representing the issuer side not the investment banks. In Singapore, I would say at least half if not more of our practice is representing the issuer side. Its not that we are abandoning our good and old friends in the banks, rather we intend to work with them in a balanced practice going forward.
You seem to be the only traditional Wall Street securities firm that is making serious investment in Asia. What do you see that the others are missing?
I am not sure that they are missing it; I just don't think they are being quite as bold as we are. I don't think they have been able to pull themselves together to do what we are doing. I think our success in London, Paris, Germany and Brussels has come from not merging with anybody. Rather we go out and hire local talent. I don't think the others have developed a strategy within these uncertain times. Although some US firms are now getting more aggressive in Europe.
So who are your main competitors in Asia?
It depends on the type of work we'e looking at. In some areas we compete more with the City of London firms than we do with the traditional Wall Street firms project financing for instance. Over time as well we see the English firms developing more and more expertise in the US markets. In addition we still compete with our friends at the Wall Street firms.
So this is quite a unique strategy you are forging here?
For an American firm it is unique. We are not following the English model of merging. And although the English firms need to delve into the US capital and M&A markets, we have that as our legacy. So what we need to do is more local practice where the English, especially in Hong Kong, already have significant expertise. That's where we need to do our side of the catching up.
I understand that recently you laid off 10% of your associates. Is that an indication that your strategy is a bit too bold in these difficult times?
As an economic matter the times have changed. And the normal attrition rate that we have assumed in our model of associates departing, that has completely changed. Our attrition rate has fallen to being almost completely negligible. So our recent review process has resulted in some terminations in order to maintain the same turnover of associates that we've had in the past three to five years. With the market place turning, the young associates were not matriculating from the firm at the rate that they were. But still our global activity levels are up which is comforting in this market place.
Coming back to Singapore, you must be very happy to have the services of Lee Suet Fern?
We are very pleased to have this association. The spirit and the culture of how we operate this is as a fully integrated operation. I view Lee Suet Fern as much as a partner in everything I do, as I regard Ed Turner with whom I have worked for 31 years. The fit of Lee Suet Fern's practice and ours was an absolute serendipity for Shearman & Sterling. Her practice is high-end corporate work without any other activities such as conveyancing or local court work that we would not be interested in.
Quite a lot of what US firms bring to the table is an understanding of the inner workings of the SEC. Now that Harvey Pitt has come into the Commission, what will the new SEC be like and how will the practice of US securities law be affected in Asia?
The move from Arthur Levitt to Harvey Pitt will bring notable changes. Harvey Pitt has represented issuers and underwriters as well as foreign issuers and underwriters and he is very aware of the pragmatic difficulties of complying with our securities laws. As a result of being on the other side, he is very aware of the economic reality too. So we expect a more pragmatic approach, rather than the very legal, theoretical approach [which went before]. I fully expect that issuers, and in particular foreign issuers, will benefit from the changes he introduces.
One example I think will be where we go with regulation FD. I think he will introduce some pragmatic sensitivity. He has a profound understanding of the difficulties that foreign issuers face when trying to get their securities listed. His empirical exposure to our problems will make things easier. That will help Asia. One of the biggest barriers when doing capital markets deals is complying with the tedium of the legal regulations as distinct from the economic issues. We are looking forward to the changes he will introduce.