The Art of Being Independent
SAN FRANCISCO — Described as irreverent, fiscally conservative and independent, San Francisco’s 57-attorney law firm Shartsis Friese doesn’t do a lot of things that its big firm competitors do.
According to firm management, the firm has never ushered out an underperforming partner in its 34 year history. It doesn’t take on debt. The firm has very low turnover, and it hasn’t lost a partner to another law firm in 17 years. On top of that, it doesn’t dole out perks for its partners, except parking privileges at its offices in One Maritime Plaza, just three blocks from the San Francisco Bay. And unlike many attractive merger targets before it, the firm has refused to be acquired by a slew of larger suitors.
“We’re outliers in a lot of ways,” says Arthur Shartsis, senior member of the ﬁrm’s management committee and de facto managing partner. No one formally holds that title.
“We let him think he’s the managing partner because he needs that and it makes him happy,” quips Robert Friese, the ﬁrm’s co-founder.
Shartsis, a complex commercial litigator, is not one to care about titles, but he does care deeply about the direction of his ﬁrm. Partners say Shartsis, 63, has been a constant and active guide as the ﬁrm has deﬁned itself as an independent and proﬁtable legal shop.
One reason large ﬁrms covet Shartsis Friese is that it competes with them for high-value and high-proﬁle business. Among the ﬁrm’s clients are: Adobe Systems Inc., Advanced Micro Devices, Comcast Corp., Home Depot USA, Gruber & McBaine Capital Management and the state of California. The ﬁrm is representing the California Department of Insurance in the retrial of a fraud lawsuit stemming from the sale of the Executive Life Insurance Co. to French investors in 1991. And in April, its corporate attorneys sealed up $261 million in acquisitions for Waste Connections Inc., the country’s third largest waste management company. Half of the ﬁrm’s attorneys are litigators, while half are corporate attorneys, and the ﬁrm has strong real estate and private equity practice groups.
Shartsis and Friese founded the ﬁrm in 1975. As a third-year associate at Morrison & Foerster, Shartsis wanted to be his own boss. He pitched the idea of starting a practice to Friese, then with the Securities and Exchange Commission, whom he’d clicked with when they met through a mutual friend. Shartsis’ wife Mary Jo, a litigator at the ﬁrm then known as McCutchen, Doyle, Brown & Enersen joined them the next year. Shartsis stepped into the managerial role.
Over the years, crafting the ﬁrm into its current form has been a shared endeavor. Partners say all of the ﬁrm’s 29 partners contribute to the decision making through consensus, and various attorneys play leader- ship roles in the practice groups and on committees. Even associates have a representative on the management committee.
“[Shartsis] has been the most visible and the most active in guiding the ﬁrm,” said Tracy Salisbury, co-chair of the ﬁrm’s litigation department and a member of its management committee. “But this is not a one-man show.”
Partners say Shartsis contributes strong views about the ﬁrm’s identity and strategy, but he’s not interested in dictating how the ﬁrm should be run. His contribution is to keep tabs on developments in the legal industry and reassess where the ﬁrm stands, then plead his case for decisions he thinks the ﬁrm should make.
Shartsis has driven the ﬁrm’s dogged adherence to its conservative ﬁscal management, its model of controlled growth and to doing what it does best—practice law. The ﬁrm’s lawyers spend as little time as possible on administrative work — not more than 2,500 hours per year collectively — by placing most administrative responsibilities in the hands of the chief operating ofﬁcer, Paul Feasby. The ﬁrm’s six-person management committee only meets if Feasby needs it to do so. Often he’ll simply poll the committee members informally if he needs their input, or he’ll announce how he plans to deal with a challenge and ask if anyone objects.
“We’ve ﬁgured out how you enable people to practice law without interference,” Shartsis said, “and that you don’t spend a lot of time on things that don’t beneﬁt either the business operation or the legal operation of the ﬁrm.”
In one instance, in 2000, the ﬁrm launched a committee to explore the possibility of starting its own venture fund, like other law ﬁrms were doing. Shartsis said he questioned it: How would they tell some clients they wanted to invest in them, but not invest in others? Who at the ﬁrm was qualiﬁed to make sophisticated investment decisions? His questions helped inspire the group to pass on the endeavor. Then the dot-com boom went bust, and a lot of other ﬁrms lost a lot of money.
Shartsis has also encouraged the ﬁrm’s no-perks policy, which he says limits partners’ feeling of inequality, not to mention whining and backstabbing. That means no special funds for buying drapes, and corner ofﬁces get taken in the order in which they become available by the next partner awaiting an ofﬁce. The ﬁrm doesn’t provide cell phones, and it doesn’t do retreats.
Inspired by the collapse of New York law ﬁrm Finley, Kumble, Wagner, Underberg, Manley, Myerson & Casey in 1987, Shartis Friese partners chose never to take on debt. The ﬁrm has set aside between $1 million and $1.5 million to cover a short month, and its partners don’t take a draw if there’s no money to do so. That reminds them that they’re owners, Shartsis said. That happened for the ﬁrst time in 10 years in February after a large January draw. If the ﬁrm’s proﬁts fall short one year, the partners suck it up.
Shartsis also helped pioneer the ﬁrm’s unique compensation system about 20 years ago. It came in part from the partners’ realization that they weren’t “tough enough” to spit out people who didn’t perform as well as others.
The system relies on a formula that is universally applied to all partners that differentially weighs billable hours, administrative hours and business generation. Shartsis says it allows partners to show up, work hard, generate business and be “showered with dollar bills,” or to spend the year playing golf or rearing a child and get paid less. The differences in pay can be dramatic – one partner at the ﬁrm can make four times what another partner makes. Yet however the partners choose to work, they’re welcome at the ﬁrm for life once they’ve passed the high bar to partnership.
Shartsis is also a long-time proponent of controlled growth. The ﬁrm’s attorney numbers rise by an average of 3 percent per year. It takes on only about two attorneys per 2,000 résumés. Shartsis’ inspiration for such control came when the American Lawyer magazine began publishing proﬁts-per-partner statistics for the country’s largest law ﬁrms in the late 1980s. Shartsis Friese wasn’t large enough to be on the list, but its earnings made it the third most proﬁtable ﬁrm in San Francisco, Shartsis said. For many years he watched the numbers, and each year the ﬁrm would have ranked among the top ﬁve ﬁrms in the region.
“So I thought, ‘Why do I want to be big?’” Shartsis recalled. “We’re happy. We like what we’re doing. The practice is interesting. We’re all having a good time together. It really was for me a pivotal moment in where the ﬁrm was going. We settled into this very careful, controlled growth, elite practice area program, and we just sort of locked into it.”
Part of not growing is not merging, which Shartsis refuses to do because it doesn’t make ﬁnancial business sense — he says his ﬁrm is often more proﬁtable than its suitors— and because he likes the freedom. That decision has been noted across the local legal community.
“Look how ﬁercely independent he is,” says Paul Dawes, a litigation partner at Latham & Watkins in Menlo Park and a friend of the Shartsises. “The consolidation in the legal industry is enormous!”
Erick Howard, a litigation partner at Shartsis Friese, said Shartsis is not just a business-minded leader. He also makes the ﬁrm “a place that you can enjoy practicing law.” He accomplishes that by showing interest in his colleagues’ professional development, trusting their input and giving them real responsibility, Howard said.
“He’s demanding, but he’s demanding in a way that makes you think you can easily do it,” Howard said.
When Salisbury, the co-chair of the litigation department, joined the ﬁrm from Morrison & Foerster in 1986 as a third-year associate, she was struck when Shartsis asked her opinion about a case and asked her to edit a brief that he wrote.
“He recognizes that he can gain a lot from the people around him,” Salisbury said.
Shartsis takes his interest in monitoring outside of the ﬁrm, spending about 100 hours each year coaching the undergraduate mock trial teams at UC Berkeley.
Howard says that Shartsis’ passion for his hobbies also helps shape the character of the ﬁrm, making it a place where interests outside of the law are supported. Shartsis has written two screenplays, which he’s currently shopping to producers in Hollywood. He hops the globe with his wife, most recently to Botswana for a safari, where he practiced another passion, photography. The couple ﬂy ﬁshes in Idaho and cultivates wine grapes in Napa Valley, which they sell to winemakers Whitehall Lane and Ramey Wine Cellars.
Otherwise, it’s work, work, work.”
Art and I are both planning on working forever,” Friese says. “We’re planning on going to the grave in the elevator of One Maritime Plaza.”