Businesses double down on mandating diversity from outside counsel
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In December, Paul, Weiss, Rifkind, Wharton & Garrison got some bad press for what was supposed to be a happy occasion. The firm posted photos of its new partnership class: 11 white men, and at the far end of the bottom row, one white woman. The picture went viral and reignited debate over the level of racial and gender diversity, or lack thereof, in the legal industry.
“We certainly can—and will—do better,” Paul Weiss Chairman Brad Karp said, apologetically. He blamed “an idiosyncratic demographic pool” and lamented that “one particular year would erase the firm’s diversity achievements over the past 75 years.” Karp has stated that one partner in the class is Latino and another is LGBTQ. Additionally, a March report from the nonprofit Lawyers of Color found Paul Weiss had the highest percentage of African-American lawyers—8.27 percent—among nearly 400 firms it researched.
The legal affairs media have documented the reality that women comprise only 19 percent of equity partnerships at the biggest firms and that just 9.1 percent are minority partners (the figures are from National Law Journal and The American Lawyer).
Other sources back up those numbers. “Paul Weiss became the scapegoat for a problem that is bigger than just them,” says the founder and CEO of Diversity Lab, Caren Ulrich Stacy. Her company, based in the Bay Area, leverages data, behavioral science and technology to experiment with ideas to boost diversity and inclusion in the law.
Stacy added that homegrown women—meaning women who joined the firm as summer and entry-level associates—and diverse attorneys “are not advancing to partnership at the same rate as their majority counterparts.” She adds that lateral partner hires are mostly white males. “If one or both of those levers don’t change, greater diversity in the equity ranks is not possible.”
As law firms grapple with surging calls for improved diversity in their partnership ranks, corporate clients have joined the chorus and added to the pressure in three ways: the carrot, the stick and moral suasion.
For instance, Microsoft’s decade-old Law Firm Diversity Program incentivizes inclusion by offering a bonus to its outside firms that increase the diversity of their partners.
On the other end of the spectrum, Hewlett-Packard Inc.’s diversity holdback scheme penalizes firms that do not meet its minimal diversity staffing requirements by withholding 10 percent of invoiced fees from those that fail to meet minimal diverse staffing requirements.
As for moral suasion, the Paul Weiss photo prompted a January open letter signed by 170 general counsels and corporate legal officers protesting that their outside firms’ new partner classes “remain largely male and largely white.” A leader of that effort, Michelle R. Fang of Turo Inc., promises an imminent follow-up this spring with more signatures and an action plan.
The chief legal officer of the Association of Corporate Counsel, Susanna McDonald, says she is impatient for improvement. “I hope the signers of the letter keep track of the actions firms take,” she says.
Companies that affirmatively try to diversify appear to succeed, Microsoft general counsel Dev Stahlkopf says. “We’ve seen quantifiable progress as a result of our incentive-based approach, and we believe that these advances have increased the quality of the representation we get and improved our results,” Stahlkopf says.
Meanwhile, HP executive communications manager Adrianna Masuko said in an email that the punitive approach works, too. “When we began, nearly half (46 percent) of the firms met the minimum diverse staffing requirement; as of [the fourth quarter of fiscal year 2018], 88 percent of the firms met our requirements,” she said. HP requires quarterly diversity progress data from its law firm partners.
Diversity Lab’s own solution is to sign firms up to abide by the Mansfield Rule. (See “Slow Growing,” October, page 52; and “Mandating Diversity,” October 2017, page 32.)
Named for a pioneering women’s rights activist from Iowa, Arabella Mansfield, who in 1869 became the first female lawyer in the U.S., the rule commits firms to affirmatively consider at least 30 percent women and attorneys of color for leadership and governance roles, equity partner promotions and senior lateral positions.
In August 2018, Diversity Lab announced that 41 firms had achieved Mansfield certification, including Arnold & Porter, DLA Piper, Littler Mendelson, Orrick Herrington & Sutcliffe, Reed Smith and WilmerHale.
Orrick management-side employment law partner Lynne Hermle, who heads an 11-female, two-male trial team that defends law firms accused of discrimination, says the Mansfield Rule works. “I think we’re going to see the most progress coming out of these types of objective, data-based approaches and joint efforts among law firms and corporate legal departments,” she says.
Stacy agrees, pointing to Diversity Lab statistics that show 40 percent of Mansfield Rule-certified law firms have increased diversity in their leadership ranks within the first year, and that over one-third of these firms are promoting more diverse associates to partner while hiring more diverse lateral associates and partners.
Of course, the best appeals might be monetary. The open letter reminds law firm partners that “collectively, our companies spend hundreds of millions of dollars annually on legal services, and we are committed to ensuring equality in the legal profession.” It was signed by lawyers from Booz Allen Hamilton; Chan Zuckerberg Biohub; Getty Images; Heineken, USA; Lyft; Toshiba America Electronic Components; 23andMe; U.S. News & World Report; Vox Media; Waymo; and others.
“We, as a group, will direct our substantial outside counsel spend to those law firms that manifest results,” the letter concludes. Fang, the chief legal officer who drafted the missive, acknowledges the skeptics who call for stronger action. “But when clients talk, law firms listen,” she says.
Correction
Print and initial online versions of “Another Shot,” May, erroneously stated that an increasing percentage of Association of Corporate Counsel members are coming from law firms. The percentage is not increasing.The Journal regrets the error.
This article was published in the May 2019 ABA Journal magazine with the title "Another Shot: After a viral photo showing a firm’s all-white and nearly all-male partnership class, businesses double down on mandating diversity from outside counsel."
