Corporate Clients Demand More Diversity from Law Firms

Law is one of the least diverse white-collar professions according to Jean Lee, president and CEO of the Minority Corporate Counsel Association. “A lot of companies made a concerted effort to increase diversity internally, and now they are demanding diversity at the firms they use,” said Lee, a former vice president and assistant general counsel at JP Morgan Chase. Facebook recently joined the growing trend of companies demanding that their outside law firms have more diversity.

The tech giant announced its initiative requiring that one-third of a firm’s team working for Facebook be composed of women and ethnic minorities. The company is also asking firms to show that they “actively identify and create clear and measureable leadership opportunities for women and minorities,” according to its general counsel, Colin Stretch. Other corporations are requiring similar diversity criteria before selecting counsel.

Companies Continue Impetus for Change

Earlier this year, HP issued a “diversity mandate to partner law firms.” In her letter, Kim Rivera, HP’s chief legal officer and general counsel, noted that HP has “made diversity an explicit business goal for our organization.” She further stated, “[i]n order to emphasize the business imperative to make meaningful strides in diversity among our law firm partners, HP has implemented a ‘diversity holdback’ mandate. The policy provides for withholding up to 10 percent of all amounts invoiced by law firms that do not meet or exceed our minimal diverse staffing requirements.”

The holdback program applies to all U.S. based law firms with 10 or more attorneys. According to Rivera, in order to comply, participating firms “must field (i) at least one diverse Firm relationship partner, regularly engaged with HP on billing and staffing issues; or (ii) at least one woman and one racially/ethnically diverse attorney, each performing or managing at least 10 [percent] of the billable hours worked on HP matters.” HP’s definition of a diverse lawyer is “limited to race/ethnicity, gender, LGBT status, and disability status. Moreover, according to Rivera, the diversity holdback will not come into effect until the second year of HP’s engagement with a firm, “[s]o, even for those firms that do not immediately meet minimal diverse staffing, there will be ample time to work toward achieving the metric.”

MetLife is another large company undertaking efforts to prod its outside law firms toward more diversity. In April, MetLife’s general counsel, Ricardo Anzaldua, convened outside law firms at its headquarters to request that they create formal plans to retain and promote diverse talent. Anzaldua, whose legal department has 900 attorneys and professionals, stated that the call to diversity is “not a game.” Rather, “it’s an attempt to advance this imperative of the profession in a transparent and generous way.”

MetLife is giving its outside law firms until June 2018 to present it with formal talent development plans that show how they will advance and retain diverse lawyers. If the plan does not initially pass muster, then firms will have until the end of 2018 to resubmit their plans. According to Anzaldua, “[i]f we don’t have an agreement on an accountability plan, I would take the law firm off the approved law firm list.”

Further emphasizing the importance of the diversity imperative, Anzaldua stated, “[w]e hold the power of the purse, and we need to make sure our service providers understand that we’re requiring this of them.” He also emphasized the point that “[i]t’s not optional. [Law firms] need to figure out as a matter of their own business model how they’re going to make their institutions more diverse. It takes work and it takes commitment, and especially on the part of those who actually control the institution.”

Corporate law departments have the clout to demand more diversity from their law firms. Many large corporations take less aggressive approaches than those of HP but nevertheless enforce its importance. Craig Silliman, general counsel at Verizon, noted that “diversity of the team is one specific criterion we use when we bid out a matter” in addition to other factors. Microsoft Corporation’s in-house litigation team adopted a bidding process that incorporates diversity. For cases that are expected to exceed $500,000 in fees, firms are requested to account for diversity in proposing their teams, including as first or second chairs for the matters. “It’s not required, but the response from the firms has been remarkably positive,” says David Howard, Microsoft’s deputy general counsel. “And frankly, within the litigation team we have done a good job of internalizing that aspect of it and have made some positive steps toward having diverse attorneys in a position of leadership on big cases.”

Corporate Counsel Join Call to Diversity

Last August, the ABA House of Delegates adopted Resolution 113, urging all providers of legal services, including corporations and law firms, to expand and create opportunities at all levels of responsibility for diverse attorneys. Resolution 113 called on clients to direct a greater percentage of the legal services they purchase to diverse attorneys. It stemmed from the work of the ABA’s Diversity & Inclusion 360 Commission, created by past ABA president Paulette Brown.

Over 20 general counsel and chief legal officers from Fortune 1000 companies signed a letter pledging to uphold the resolution and urged other key in-house legal counsel to use the ABA’s model diversity survey to measure the effectiveness of diversity and inclusion in the legal teams they engage. Paul Dacier, general counsel of EMC, a signatory of the letter, stated “[di]versity is a very important matter for our society and particularly for the legal profession.” He added “If I can have one of the most diverse departments in the company, then I expect the same from the attorneys who work with me.” Silliman, who also signed the letter, noted the importance of his participation as a Caucasian male who never fit into the category of diversity, stating “If it is only women talking about diversity, it becomes a women’s issue. If it is only ethnic people talking about diversity, it is an ethnic person’s issue. Men need to be talking too because this is about how we ensure we get the very best talent in our companies.”

Diversity by the Numbers

The 2016 Vault/MCCA Law Firm Diversity Survey Report, based on findings collected from 225 participating law firms, revealed that minority lawyer employment by law firms continues to grow slowly and lawyers of color remain underrepresented in the partnership ranks.

About 15 percent of respondent firms’ attorneys are members of racial or ethnic minority groups while more than 90 percent of the partners are white. Additionally, African American lawyers are less represented in law firm populations than they were nine years ago while Asian Americans represent the largest group of non-white attorneys. Despite this, the survey showed that these attorneys are less likely than African American or Latinos to be partners or hold leadership positions within their respective firms.

The diversity survey did, however, present improving information concerning women attorneys, noting that women make up 34 percent of all law firm attorneys, with 8 percent of lawyers being women of color. These figures are the highest reported since the survey’s inception. Law firms also reported that new attorney hires included more Hispanic women than men, and almost half of the Hispanic lawyers to make partner in 2015 were women. LGBT attorneys reported by law firms also continued to increase.

As we become more diverse on the business and home front, law firms that do not make the long-term investment to reflect these changes will fall behind. A lack of diversity “affects your bottom-line business” says Lee. Despite the business and social case for diversity, law firm hiring and retention practices, while improving, are still wanting. Corporate clients, however, are stepping up their efforts to influence law firms in this regard. Perhaps by flexing their purchasing power, companies will accelerate the efforts of law firms to effectuate positive change.