Corporate Departments Are Taking The Lead In Creating A More Diverse Legal Industry
The legal profession has a dismal record on diversity—especially large law firms. Between 2007 and 2015, there was a decline in the number of black attorneys in big firms. And, per the same study conducted by the Minority Corporate Counsel Association and Vault.com, the number of Asian-American lawyers receiving promotions in 2014 was less than in 2007.
Women, who now comprise about half of the entering US law school population, have fared only slightly better. While the gap in pay disparity between female and male attorneys has narrowed during the past decade, the playing field is not level for them, either. Female attorneys still make only 87% of their male counterparts, and women comprise only 20% of partners at large firms according to ‘The Glass Slipper Report.’ Just 4% of large firms have female managing partners. Why are law firms so behind the societal curve?
Firm Structure And Culture Are Inimical To Diversity
Large law firms share a common organizational structure and performance/reward system. The traditional law firm partnership model is decentralized; each equity partner is a separate profit center—a tent in the bazaar. That militates against adoption of broad initiatives, especially those that disrupt the status quo. The law firm performance/reward system is tipped heavily in favor of business origination, and rainmakers—especially older ones–have no financial incentive to build for the future of the firm. The absence of residual ‘equity’ (as opposed to law firm partner profit sharing mistakenly referred to as ‘equity’) has been one reason why law firms have been so slow to adopt change that threatens its model. Those at the top of the pyramid are running the table, not worrying about the next rack. And while diversity and other shifts in firm culture are no doubt good long-term, firms are disinclined to undertake initiatives they view as dilutive of year-end profit (PPP). Diversity is a long-term investment, and the traditional partnership model is a short-term for all but a handful of elite firms.
True, many firms have launched diversity initiatives. But diversity—like other cultural commitments– is more than a policy to hire candidates from different backgrounds, ethnicities, genders, and sexual preferences. Diversity requires an ongoing organizational resolve to identify high-potential diverse candidates; to provide them with mentorship; to encourage and enable them to acquire a sound understanding of the client’s business, objectives, and risk tolerance; provide them client interaction; and meaningful periodic review intended to drive the individual’s success within and outside the organization. Mentorship takes time and commitment—from mentor and mentee. Bottom line: don’t expect traditional partnership model law firms to become diverse institutions any time soon.
Corporate Legal Departments Reflect Enterprise Commitment To Diversity
Corporations understand that diversity pays many dividends. Corporate legal departments, in turn, have adopted the enterprise commitment to diversity, and that’s a big reason why diversity candidates fare better in large corporate legal departments than in law firms. The delta can be explained by two key differences: (1) enterprise culture; and (2) performance/reward criteria. Corporate America sees the long-term benefits of diversity; law firm leaders tend to take a short-term view due to firm structure. Likewise, in-house lawyers are incentivized to identify, mentor, and promote young talent. Law firm partners—especially older ones—have little incentive to do so. That’s changing because corporate legal departments are insisting outside counsel get serious about diversity.
Diversity In A Buyers’ Market: In-House Counsel Are Pushing Firms
The legal industry is a buyers’ market, and corporate legal departments are exerting leverage on law firms beyond taking more work in-house, exacting steep discounts, and sourcing more work to well-capitalized, tech and process savvy legal service providers with corporate models that more closely resemble their own. They are also insisting that law firms deploy a diverse workforce for their matters. That’s taking on different forms.
Microsoft has adopted a ‘carrot’ approach, offering annual bonuses to its outside law firms intended to increase diversity in partnership and firm leadership roles. Hewlett-Packard (HP) takes a ‘stick’ approach to the diversity issue with its outside law firms. Kim Rivera, HP’s chief legal officer, recently announced the company’s new get-tough-on –diversity policy that applies to all US-based law firms with 10 lawyers or more retained by HP. After a one-year phase-in period, HP will impose up to a 10% hold back of firm fees if certain firm diversity requirements are not met. To comply, firms must have at least one diverse firm relationship partner regularly engaged on billing and staffing issues or at least one woman and one racially/ethnically diverse attorney, each performing or managing at least 10% of hours billed to HP.
MetLife is about to unveil a new diversity initiative with outside counsel, one the corporate legal department has spent the last few years developing internally. MetLife’s ‘Talent Stewardship Initiative’ is largely the creation of Ricardo Anzaldua, the company’s Executive Vice President and General Counsel. Ricardo’s commitment to diversity runs deep, dating from his teenage years in South Texas. During the course of his illustrious legal career, he has rued—and sought to rectify—the legal profession’s lamentable record on diversity. It’s little surprise that he’s a good fit at MetLife, a company where diversity, in his words, “is a part of how we do business.” He has built on that corporate culture by creating the stewardship program—part of a larger, multi-pronged approach to the diversity issue.
The Talent Stewardship Initiative creates sponsor relationships where senior leaders are accountable for providing experience, exposure, training, and leadership guidance to employees with potential for advancement. The program is intended to identify and nurture the professional development of promising young lawyers and compliance professionals, pairing them with senior management who ‘have been in their shoes’—and succeeded providing hands-on guidance. Both sides are vested in the other’s success. Selected participants have no guarantee of staying in the program—they must demonstrate a commitment to succeed with demonstrable results. Their ‘stewards,’ likewise, have ‘leadership skills’ as part of their job description, and their success in the program is one way their leadership is measured. The program is a long-term commitment to the success of the enterprise and an outstanding succession planning tool. It is also has a salutary impact on the legal profession, ensuring that the next generation has more diverse leadership.
At a time when public confidence in lawyers and the legal system has ebbed, a more diverse legal profession is not just an aspiration but also a necessity. It’s unlikely that change will come from law firms—it seldom does. The best hope for a more vibrant, diverse legal industry is that legal consumers like MetLife lead by example—and leverage–to change the industry’s cultural stasis. That will open the leadership doors to a wider pool of worthy candidates better equipped to restore public confidence in lawyers and faith in the legal system.