Big Think Interview With Cyril Shroff
Mr Cyril Shroff is a managing partner of Amarchand & Mangaldas & Suresh A Shroff & Co - India's largest and foremost law firm, with approximately 450 lawyers. Amarchand Mangaldas has offices at Mumbai, New Delhi, Bangalore, Kolkata and Hyderabad. With over 25 years of experience in a range of areas, including corporate laws, securities markets, banking, infrastructure and others, Mr Shroff is regarded and has been consistently rated as India's top corporate, banking and project finance lawyer by several international surveys including those conducted by International Financial Law Review (IFLR), Euromoney, Chambers Global, Asia Legal 500, Asia Law and others.
Mr Shroff has authored several publications on legal topics. He is a visiting lecturer of securities law at the Government Law College. He is a member of the advisory board of the Centre on Lawyers and the Professional Services Industry, established by the Harvard Law School, and a member of the advisory board of the National Institute of Securities Markets (NISM).
Mr Shroff is a member of the executive council of the legal practice division (LPD) of the International Bar Association (IBA) and the advisory board of the Asia-Pacific forum of the IBA. He is a member of the Media Legal Defence Initiative (MLDI) international advisory board. He is also a member of the primary markets advisory committee of the Securities and Exchange Board of India. Mr Shroff is also part of various committees of the Confederation of Indian Industry (CII) - the national council on corporate governance, the national committee on commodities markets, the subcommittee on financial investors, the national committee on regulatory affairs and the national committee on capital markets. He has also been a member of several governmental and other regulatory committees on law reform concerning the corporate and securities market, bankruptcy laws, commercialisation of infrastructure, etc.
Mr Shroff was admitted to the Bar in 1982 after receiving his BA and LLB degrees from the Government Law College in Mumbai. He has been a solicitor at the Bombay High Court since 1983.
Question: How is India approaching the financial crisis?
Cyril Shroff: India has not really had, a sort of severe impact for the financial crisis. The impact had been somewhat muted because of prudent financial management as well as some basic structure factor which have insulated it from the global financial crisis. And I could recite specific reasons for that, for some of them include the fact that our economy had been primarily domestic focus of the dependents on rest for demand as well as for capital has also been somewhat limited. Secondly, our financial system has always pursued the policy of more prudent management. Our banks are well-capitalized. We have not had exposure to toxic assets and these are some of the factors that have contributed to insulating us somewhat from global conditions.
Question: Is India similar to an E.U. country in its approach?
Cyril Shroff: If I would compare with European country I think it’s still much, much better off. Our financial institutions, not even one of them is broke. Even in the beginning, of this sub-prime crisis the only impact was the fact that there was actually increase liquidity into India as a result of Fed rate cuts in the US. So the regulatory response was really to try and sterilize the extra liquidity that was coming in. As far as the second major milestone event in the financial crisis, the Lehman bankruptcy even that didn’t have much of an impact because their little counterparty risk which Indian banks had to Lehman or events which flew out of that. So we’ve had a muted impact. That being said, the global conditions have had some impact as much as capital flows have been reduced and have been more subdued, our capital markets have, our stock markets have fallen quite significantly since the peak. They are reviving in more recent weeks but they had at one point of time come down quite sharply.
Question: What makes doing business in India different than doing it in the West?
Cyril Shroff: Well, a number of factors which highlight differences between doing business in India and doing that in the west. Firstly, in India, Indian entrepreneurs have historically had to even now have to struggle to a fair amount of bureaucracy and still make it, make it to the top. So they have two functions and there are more constraining policy conditions but nonetheless they have entrepreneurial energy and the familiarity with the landscape helps them to still walk through the system.
They are able to take advantage of a number of structural factors in India such as our demographics, the availability of skilled professionals and just to share energy of a very young country. Other differences include the ability to move quickly. In India’s growth has primarily private sector entrepreneur-driven. Unlike--I don’t want to bring in the China comparison too early--but China’s growth has been largely driven by public sector and governmental intervention but it’s probably the exactly the other way around as far as India is concerned. Businessman who would never have heard about 10 to 15 years ago, are amongst the top 10, 10 or 15 businessmen incorporates in India. So that’s one big difference.
The other cultural difference between doing business in India and doing business in the West is a fair amount of informality in terms of how structures work. There is a very high proportion of promoter and family-controlled businesses. Most of corporate India barring a few is promoter and family-controlled. So that brings with it, some special cultural dimensions to it as well, not necessarily in a bad sort of way but it allows this kind of businesses to act quickly in a more entrepreneurial format. So they are less institutional and more entrepreneurial.
Question: How did India come to dominate outsourcing?
Cyril Shroff: We have benefited tremendously from the outsourcing opportunity and initially it began as a cost arbitrage because the cost of hiring skilled professionals in India was significantly lower than in the West. But more recently we moved up the value chain quite a bit. So today, we’re not just outsourcing low end jobs like call centers but have moved up the value chain in terms of research and development facilities and more complicated functions, financial, and other functions which are being outsourced to India. A number of global financial institutions for instance have their back offices in India handling very complex financial models, handling some of the global accounting practices, so it’s. . . . We’ve just tapped the tip of the iceberg at this point, and there is much more to come. The problem today in India is that despite our large population there are still not enough skilled professionals which can allow us to truly exploit this opportunity.
Question: How did you build your law firm?
Cyril Shroff: Well, I think the history of from goes back a long time, we are more than 90 years in existence and right till the early 90s, we are essentially a boutique shop we specialize in a few areas including financial services. We are very well reputed but and more punching way above our weight but we were small in terms of the size of the operation.
The main growth has occurred in the last 15 years. That’s been driven primarily by I think three factors. First and foremost the market group. The Indian economy really started globalizing and getting more liberal from the early 90s after the policies that the government pursued so that gave us firstly that large amount of transactional work on the basis of which you could build a large corporate firm. So the market opened up.
The second important factor was the availability of high quality employable law graduates from universities that were being set up using a slightly different model. The national law schools, which you have sort of based on management institutions, they changed the format in terms of legal education, so the availability of high quality law graduates allowed us to recruit and fuel this expansion
And the third factor, which is sort of more personal to us was a more entrepreneurial, more western oriented management culture. Our law firm is structured very similar to many western organizations. We have formal career tracks, practice groups, and we’ve tried to use best practice in terms of structuring our organization more institutionally.
Question: What kind of leader are you?
Cyril Shroff: I think I inspire trust and a lot of the young generation has believe in the vision that I have spelled out for them. I have been very open in terms of communicating what my vision for the firm as well as the vision for the Indian legal industry has been, a firm believer that India’s independent law firm sector has got enormous potential and there are a lot who believe in that vision and follow me.
Question: What challenges do global law firms face?
Cyril Shroff: I see basically two models of law firms in the world. One of the global law firm they go by the name of one-stop shops, which will open an office, everybody see and opportunity and will also practice the local law of that jurisdiction.
That’s a successful model as well but that’s not the only model. And the other model is those of independent law firms, national champions like ourselves which have some unique strengths as well and I think both have their strengths and weaknesses. For practicing a cutting edge work in a jurisdiction I think the latter model is infinitely superior because you have the best lawyers and the best expertise that is available.
We are seeing also the impact of the financial crisis for instance on the former model. The former model is driven largely by following financial sector clientele across the world and when the financial sector itself, the leading global banks, and investment banks they themselves come under pressure. The natural impact on this law firms is also where they feel the pain with them as well and like the banks themselves are shrinking so are the law firms. Whereas firms like ours and in different other jurisdictions they somewhat more insulated.
Question: Should foreign investors worry about intellectual property rights in India?
Cyril Shroff: There will always be some amount of nervousness not because we do not substantially recognize those rights but enforcement can be somewhat slow and patchy but for a diligent American corporation which is willing to pursue its intellectual property rights and protect them, India will still deliver the end product and a number of corporations have experienced that, for instance companies like some of the leading technology players in the world--I don’t want to name them--or even drug manufacturers, they’ve had eventually, they have been able to achieve justice.
Question: How does the caste system affect Indian society?
Cyril Shroff: You know, I always love saying this, there are really at least two India’s, there is an India or a shining India the one which the west seas usually through urbanize and there is an India outside some of the big metro policies and in even the tier two cities and in rural India which is completely different. It goes by the name of Bahar which is a traditional name for India.
And it’s there that this sort of these differences of a shop that India has not moved into the 21st century as about India has, but both coexist. In that part of India factors which are based on regional considerations, caste being one of them is very significant and whether it’s who do you like to partner within business, who will you employ, who will you get your daughter married to, who will you vote for: a lot of that gets driven by caste factors. And this is there since time in memorial. India is a civilization which goes back more than 2000 years and some of these have just passed on from generation to generation because there’s the complex cultural history of this country.
Question: Will the caste system fade as India modernizes?
Cyril Shroff: I think firstly in urban India, these factors are somewhat more muted. I won’t say that they completely absent but they are far more subdued. Education and exposure to the West have mitigated a lot of these differences.
So people like myself or my colleagues, we don’t even think about this. My own law firm for instance is extraordinarily diverse. We have probably someone from every caste and community in India. Our firm is diverse in terms of gender as where we got nearly 50 percent women. So firms like ours, our organizations and we are different in as much as these factors don’t make any difference to us.
However, even within city like Mumbai or Delhi, there could be a tier of organizations where these factors do matter. They could be organizations which are for instance known as a Gujarati firms or Marwari firms or south Indian firms, so these factors do make a difference. And a lot of it is driven by economic differences, not just the caste system.
Question: How is the gap between rich and poor hurting the country?
Cyril Shroff: The fact that our democracy, our ownership, our belief in private ownership and lack of adequate social security nets has only helped in widening the differences between the super, super rich and the poorest of poor.
In India you would find people who belong to the 10 richest people in the entire world, and you would find people whose poverty levels are sub-Saharan in fact practically: people who would probably make less than a dollar a day or would only have enough for one meal.
Now, to have these kinds of contrasts coexist, is something which boggles my mind. We have a country that is making great economic progress, a country that is making his presence felt all over the world, but at the same time, it is unable to deal with some of these fundamental contradictions in our economic evolution.
For good or for bad, India has rejected a more totalitarian approach to how it will deal with its social problems. We would starve but we would not give up our democracy and our love for our freedoms and to deal with these problems in an atmosphere of democracy and the rule of law without necessarily going, sort of resorting to civil disobedience or any kind of violent revolution. It’s extraordinarily difficult for any government of the day to deal with this problems. So I have no answer to that, all that I know is that it varies me as I’m sure as it varies a lot of other people like myself.
Question: How did the Mumbai attacks change India’s attitude toward terrorism?
Cyril Shroff: It’s a landmark event in our psyche. We were always worried about terrorism which was mainly cross-border. In the initial years we thought of it essentially as a problem that was effectively centered around Kashmir and there were sporadic incidence across the country.
But I think 26/11 changed a lot of that because it made us all realize how vulnerable we are and how soft the target we are. Mumbai which is such a prominent commercial city and how easy it was for a bunch of 10 to 15 young boys effectively to come and hold a city to ransom for nearly four days and occupy the attention of the whole world just showed how weak we are. And I’m sure Mumbai is not the only city which can if they decided to do it, in any other European city as well, I’m sure they will find a way because they are determined and have belief that really have nothing to loose.
How do I view the security situation? I say with a lot of trepidation because everyday we open the newspapers and we see the situation on our western border deteriorating and our heart sink lower and lower everyday. We don’t know where that is going to end but we are really relying upon Washington to help us resolve this.
Look at the way India reacted. Did it post-26/11 take a bunch of fighter aircraft and bombed these camps out of existence. They could have done that I’m sure but I think the outcome of that would have been far worse. This is probably what those behind the attacks were looking for, and I’m glad that our government was mature enough not to fall into that trap.
Question: What action are you taking to reform security?
Cyril Shroff: So a bunch of like-minded citizens like myself be filed a public interest litigation in our high court in Mumbai seeking mandatory judicial reliefs for police reform, because we thought one of the factors that would be essential for preventing in recurrence of this in the future would be a stronger security set up, a more empowered police and this case is pending in our high court. Our judiciary has got quite interested.
The reason why I did this was that India and particularly people in urban cities have over a period of time have got anesthetizes to some of these incidents that were happening everyday. 26/11 of course was different but it was perhaps too careless to assume that the Mumbai spirit of tolerance will take us through even such incidents and we had to do something about it. So we wanted to have a positive action in a more civilized way which was not backward-looking but was meant towards finding a solution and this initiative that was taken by me and a few others received a lot of support and I do hope that this case goes through and eventually something comes out of it. But people are at the superficial level, they’re back to business as usual but 26/11 I think has left a deep scar on people’s minds.
Question: How have the attacks affected business in India?
Cyril Shroff: One thing it certainly has done is I think every businessman in India or somebody doing business with India recognizing terrorist risk as now an important business consideration. I think the cost of business, doing business in India has gone up. It fundamentally hasn’t affected people’s views on India as yet because people believe that this is something which is a global phenomenon. Terrorism is not confined in it’s, in its damaging impact only doing the defects on number of other countries as well.
So while at one level has been taken in stride it has increased a cost of doing business. No one in the world is saying, we’re not going to do business in India, because it is a high risk target. On the contrary. In fact the West went out of its way to demonstrate solidarity with us. As lawyers there was an important delegation of the American Bar Association which we hosted in on the Mumbai leg they came to India in early January. Post 26/11 have given them the option to cancel the trip and said, we’re not going to do that. We are going to be in Mumbai because this is exactly what the terrorist wants us to do and we’re not going to do that. So the West has shown extraordinary support.
Question: How has the West changed its view of India?
Cyril Shroff: If one looks at the history of India after independence in 1947, for the first 30 to 40 years I think we were effectively given up as a basket case because we made various attempts through socialism to effectively alleviate poverty and keep growing but that model didn't work.
So even when the pre-90s when we spoke to foreign corporation of foreign businessmen who wanted to do business with us, we were always a land of opportunity but an opportunity whose time have not yet come. The attitude I think really changed from the early 90s when the liberalization or our second economic freedom really began and this picked up momentum I would say into the latter half of the period between 91 till now.
Currently, I think India is looked at with a lot of respect across a number of dimensions. Let me enumerate a few. It’s looked at as a safe environment in which, thanks to the rule of law, one can do business and no one really has lost a lot of money in India. On the contrary, people have made enormous profits. The fact that we are built upon private sector concepts is also a great comfort.
The second dimension I think is the India people are regarded as very intelligent, skilled in maths and science, very comfortable with things ranging from philosophy to music to the arts and that’s something which fascinates the world as well.
India is developing a lot of soft power, and it’s not just about us providing outsourcing and call centers to the world. We are providing a lot of thought and a way of life. I think we’re also respected for fundamentally a non-violent belief thanks to our religious roots whether it’s Hinduism, Jainism, Buddhism, we contributed more religions to the world than any part of the world and that’s something which does find its way into how the world looks at it.
At some point of time everybody has a spiritual need and somewhere or the other you find that Indian connection. So our culture is making a big difference and, whether it’s our curries or movies like "Slumdog Millionaire" or whether it’s just the Bollywood numbers to which a lot of the world is rocking, I think India's soft power is going up. And we are contributing a lot of entrepreneurs to the world as well whether it’s people like Lakshmi Mittal or Indra Nooyi or thinkers like Amalti Singh. This is all happening because of there’s something fundamentally right and thoughtful about Indian society. That’s how I see it. I may be wrong, but that’s how I see it.
Recorded on: April 29, 2009
A conversation with the Managing Partner of Amarchand and Mangaldas.
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