Profile | Autumn 2016
‘It was ambition that made me decide to leave Barclays,’ declares self-confessed deal junkie Michael Shaw, who resigned from his role as the bank’s deputy general counsel in the summer of 2015. Shaw was eager to pursue a weightier leadership role after six years serving as the ‘apprentice’. Bob Hoyt had succeeded Mark Harding as group GC in 2013 and ‘the only other sensible alternative’ of interest to Shaw was head of legal for investment banking. Pipped to the post by former Gibson, Dunn & Crutcher partner Mark Shelton, an obvious choice as that division serves as Barclays’ crown jewel in the US, Shaw’s ambitions turned elsewhere.
Emphasising that Hoyt and Shelton were ideal candidates for the respective roles, he adds: ‘I needed to stop being stupid and make myself available. So I said goodbye. It took me a while to untangle myself, but we negotiated a satisfactory exit. I started searching in earnest.’
Shaw didn’t have to wait long for his break, and was headhunted by RBS, securing one of the most prominent GC positions in the UK. He succeeded incumbent John Collins who made a surprise defection to Santander UK just a year after accepting the role.
I needed to stop being stupid and make myself available. I said goodbye to Barclays.
Speaking to The In-House Lawyer at RBS’s Liverpool Street offices, Shaw is relaxed in his new surroundings. ‘In my mind there were two things I could do: I promised my [Japanese] wife that we would go to Japan. The alternative was if a really great job came along I would grab it. So here I am.’
Shaw inherited a 400-lawyer team that will be kept busy over the coming months with ring-fencing reforms and the expected return of RBS to private ownership following its £45bn government bailout in 2008. The bank is also in the process of selling challenger bank Williams & Glyn, which has 1.8 million customers, as a condition of its state bailout during the financial crisis.
RBS’s legal division oversees a host of franchises within the bank. Most lawyers are UK-based and have evolved from a federation of business groups to one consolidated unit, much like Barclays. Shaw sits at the top of the legal tree and below him is a web of business-facing legal counsel that serve the commercial and private bank, the retail and business bank, and the corporate and investment bank, while there are also GCs for litigation and investigations, strategic services, restructuring and lending, and separately for the Americas.
No stranger to high-pressure environments, Shaw gained an appetite for deal making at Clifford Chance (CC) in the early 90s. His initial intake included Geoffrey Timms and Tim Fallowfield, now legal chief and company secretary at Legal & General and Sainsbury’s respectively, and David Pearson and David Pudge, now prominent CC partners.
Shaw was serving the final stages of his training contract in Tokyo when the UK dipped into recession and his commitment to the firm started to waver. He says: ‘Within two years the firm was struggling because it hadn’t dealt with rationalisation issues. It basically bolted both sides together [after the Coward Chance/Clifford Turner merger in 1987]. That turned out not to be a great idea when the market moved from boom time to constrained time. So I jumped ship.’
Shaw found himself torn between Herbert Smith and Slaughter and May – both ‘great firms with [fewer] differences at the time’.
Probed on whether Slaughters seemed a daunting proposition, he responds: ‘Oh yeah… It was a sink or swim environment. I confess that while Slaughters was tempting and, I think, still is the pre-eminent law firm, I believed Herbert Smith would offer a gentler environment. Some people might find it surprising to hear me say that.’
I sat down with Tesco GC Adrian Morris and we commiserated with each other. My hat goes off to him. He did an immense job.
Shaw went on to complete a 17-year stretch at Herbert Smith where he led on major transactions. Making a name for himself among investment banks, high-profile deals included working on Rio Tinto’s hostile bid for BHP Billiton, and for EDF on its takeover bid for British Energy.
His mentor during the early years at Herbert Smith was young associate James Palmer, now Herbert Smith Freehills’ senior partner, and a lifelong friend. Shaw says: ‘Having someone just a year and a half ahead of you – especially someone as precocious as James – can be an advantage. Being mentored by someone ten years older can mean it’s hard to know whether your feelings resonate with theirs.’
Taking the lead advising EDF on the takeover of British Energy convinced Shaw of the career prospects in-house. ‘It was going to be hard to find anything to top that deal. It was so high profile, so political, so complex, so exhausting… but enormously enjoyable. I thought: “Where will I get a chance to do that regularly for the next ten years? Am I destined to reflect on that deal forever? Maybe I should look for an in-house role?” No sooner had I come to this conclusion, the phone rang. It was a headhunter for Barclays. It was exactly what I wanted.’
Shaw made the leap at the end of 2009. During his time at Barclays, the bank faced investigations over manipulation in the Forex and Libor markets, while he also held a string of management titles. He was a member of the firm’s citizenship council and the disclosure advisory group, which counsels the company on what has to be included in stock exchange announcements.
During his tenure, Shaw says achieving greater consolidation of the estimated 1,000-strong legal unit was a major feat for the team. ‘It wasn’t easy, quite frankly. Not everyone wanted that. A lot of people liked it the way it was. The investment bank and Barclaycard didn’t change a great deal within the rest of the organisation – trying to take each legal team out and convince it to be part of a broader legal function required a hearts-and-minds exercise.’
The calibre of Barclays’ lawyers was high. ‘They were very ambitious lawyers which made for a very lively environment. It wasn’t always plain sailing. It was always stimulating, challenging. There are cutting-edge legal issues that make banks great places to be a lawyer.’
At RBS, Shaw is tasked with addressing plenty of cutting-edge legal issues. Cost constraints remain high on the agenda, with chief executive Ross McEwan warning in February that a further £800m of cost savings will be made in 2016 after eight successive years of net annual losses (which have amounted to more than £50bn since the financial crisis began).
The executive-led drive for greater efficiency is an objective the legal division is all too aware of. Shaw began assessing efficiencies within the 400-strong in-house team earlier this summer, a move that could lead to staff redundancies. It follows last year’s review of external advisers, where RBS asked law firms to freeze their rates in exchange for five years on the panel. Those who pitched at higher rates would receive spots for three years.
Why is it lawyers think they’re the cleverest in any room, but boards think of us in a different way? We need to think about what’s wrong with our training.
Shaw admits: ‘We expect a lot in return for making them part of our inner circle. That’s not just simply doing a great job on other matters. We expect superlative value for money. We expect them to work with us in terms of helping [us look] down the track strategically and see what’s going to hit us next. There are a variety of ways in which we measure the value of their output.’
Shaw pushes for collaboration between panel law firms and adopts a less heavy-handed version of Pfizer’s legal alliance programme, which operates a flat fee structure.
‘We combine law firms in a way people didn’t historically do. We tend to get people to come in and do the strategic piece while someone else will do the heavy lifting at different price points. There will be things we will evolve and improve upon but all the foundations are there.’
His ‘day-to-day plan’ involves getting on top of major issues concerning the board, the bank and shareholders. Secondly, he is seeking to form strong relationships with the executive. ‘Frankly, if you don’t have that you cannot deliver change.’ He is also sizing up internal and external costs to see what further savings can be achieved.
He says: ‘Those are the three main priorities. You can’t get away from cost constraints in banks. We have to get to a place as quickly as possible where we resolve all these legacy issues. We know we’re going to take a hit from the cost of doing that – whether it’s the fines and settlements levied by authorities or engaging in litigation.’
Other projects include ring-fencing, where Shaw is all too aware of the expense involved. ‘You’ve got to be careful. You need an acute awareness of other costs to achieve profitability. We’ve had losses for eight years running. There’s a limit to how long you can keep doing that for.’
Shaw will begin reviewing budgets in the autumn and will plan for the next three years. He says: ‘I’ll be looking to see what others are doing. I’m happy to borrow ideas from other people.’
RBS will, of course, face major logistical hurdles now that the financial services sector has been hit by Brexit, while unprecedented levels of regulation and scrutiny levied at the sector look unlikely to dissipate in the near future.
‘We would certainly hope the amount of regulatory change would reduce. Hopefully we can see light at the end of the tunnel. A remaining issue for the industry is ring-fencing – the work started several years ago. That is truly irritating. We have been doing lots of work in preparation. The final strand will start in the next six months and will continue until 2019.’
Shaw admires the usual suspects of heavyweight in-house counsel, naming BT’s Dan Fitz, BAE Systems’ Philip Bramwell and Vodafone’s Rosemary Martin.
He also cites Tesco’s Adrian Morris, who he caught up with over lunch six months after the supermarket giant’s ‘period of hell’.
‘We compared notes and commiserated with each other. At least when I was at Barclays, despite it being supremely challenging when we had lost our chief executive, chairman and chief information officer in the space of one or two months… for poor Adrian there was just him and one other guy in senior management who knew what the hell was going on. Legal was at the heart of things at Barclays but we weren’t alone. My hat goes off to him. He did an immense job.’
His confidence to break away from Barclays stems from his family background. His father was an entrepreneurial man with a finance background who moved the family to Lagos, Nigeria, when Shaw was a child. It wasn’t until his father contracted hepatitis while there and subsequently became unemployed that they returned to the UK.
‘What happened to my father… he was someone with three kids who saw the value of having security in a profession that provides a good way of achieving that. He was very keen I become a lawyer or accountant. I was always better with words than numbers. He’s not with us anymore… but those influences on your life… you asked me who I admire… undoubtedly it’s been him on me.’
Shaw observes it would be nice to see in-house lawyers evolve to one day become chief executives. ‘Why is it that, although lawyers think they’re the cleverest in any room, when you get into a business, boards and other business people think of us in a different way? Yes they admire you for your intellect. But they don’t see you as being great material for chief executive roles or even a non-executive director… all other professions – accountants and bankers – are likely to be picked ahead of us. We need to think critically about what’s gone wrong with our training and the type of people we’re recruiting.’
Such experiences mean Shaw feels no regret on leaping from private practice to in-house, and concludes: ‘Being a GC is the best thing a lawyer can do in many ways. It’s the optimum opportunity to use your legal skills in a broader context and have a broader range of opportunities and skills you might otherwise be oblivious to. Take a chance.’
At a glance Michael Shaw
- 1988 Trainee and associate, Clifford Chance
- 1992 Associate, Herbert Smith
- 1996 Secretary to the Takeover Panel (secondment)
- 1997 Partner, Herbert Smith
- 2009 Deputy group general counsel, Barclays
- 2016 Group general counsel, The Royal Bank of Scotland
The Royal Bank of Scotland – key facts
- Size of team 400 lawyers
- Legal spend £1.3bn, including penalties
- Preferred UK legal advisers Allen & Overy, Ashurst, Brodies, Clifford Chance, Dentons, DLA Piper, Herbert Smith Freehills, King & Wood Mallesons, Linklaters, Macfarlanes, Norton Rose Fulbright, Pinsent Masons, Reed Smith, Simmons & Simmons