Corporate America pressures law firms to promote minorities

(c) 2016, Bloomberg.

What does diversity mean in the age of a Donald Trump presidency? Even as the U.S. and the globe become increasingly diverse, the president-elect’s Cabinet appointments have so far been strong on billionaires and white men and weak on women and blacks.

While Corporate America still gets low marks for opening its boardrooms and corner offices to women and minorities, many companies are trying to do better. One recent effort is the work corporate legal departments are doing to encourage outside law firms they work with closely to promote more of their high-performing women and minorities.

Law firms’ top ranks remain overwhelmingly white and male. Though roughly half of all law school graduates have been women for about two decades, they represent only about 20 percent of partners at law firms that have signed the New York City Bar Association’s statement of diversity principles. The falloff is even steeper for minorities, who make up 26 percent of associates but only 8 percent of partners.

“Until diversity is a decisive factor in awarding business, we’re not going to move the needle,” says Deborah Epstein Henry, co-founder and managing director of Bliss Lawyers, a legal recruiter.

Now, despite the changing climate in Washington, a group of 60 corporate general counsels from Fortune 1000 companies are putting pressure on their outside law firms to adopt a more rainbow-colored hierarchy. These in-house lawyers are supporting an American Bar Association resolution to give more business to minority and female lawyers. They also vow to push business to outside firms that have promoted minorities, based on demographic data they are asking to see.

“I’m getting staffing that makes it look like I have a diverse team,” explains Mark Douglas Roellig, general counsel of Massachusetts Mutual Life Insurance Co. “But those women and those people of color are not making it up to the partnership ranks.”

Big corporate clients can exert financial leverage over the law firms that vie for their business, says Brad Smith, president and general counsel of Microsoft Inc. He created a program in 2008 that awarded a bonus to Microsoft’s outside firms if they met specific goals, such as increasing the number of hours minority and female lawyers worked on the company’s business by 2 percent a year.

The program got results. Between 2008 and 2015, the proportion of Microsoft’s business awarded to women and minority lawyers rose to 48 percent from about 34 percent. Last year, Smith revamped the program to make the bonuses depend on diversity in the leadership ranks.

“You need to have diverse legal teams to understand the way the world works, because the world is diverse,” Smith said. Microsoft’s own in-house lawyers are now 58 percent women or minorities, up from 48 percent in 2008.

Some companies are going even further. Drugmaker Bristol-Myers Squibb Co. started a pilot program this year to mentor diverse lawyers from four of its outside law firms so they’ll have a better shot at making partner. Each associate is paired with a senior attorney at BMS and a more junior lawyer to get the day-to-day perspective, said Adrienne Gonzalez, the BMS attorney who proposed and now runs the program. The attorneys also get executive coaching and work on at least one legal matter for the drugmaker during the year-long program. For BMS, the effort is just good business, Gonzalez said.

“Our patients reflect our employee population and vice versa,” she said. “Our employees have families that take our medicines.”

Home Depot held a town hall at its headquarters in Atlanta for law firms owned by minorities and women so they could bid for the retailer’s business alongside the large national legal advisers. Last year’s event drew 19 prospects.

“When we are considering hiring a firm, we want to make sure we have a diverse slate of candidates,” says Teresa Wynn Roseborough, Home Depot’s general counsel.

While more large corporate clients are asking outside firms to boost diversity, few say they have fired a firm because it was run by too many old white men. And therein lies the challenge.

“The question is, will the client actually move business as a result of diversity or the lack thereof,” said Bliss Lawyers’ Henry.

The pressure to adapt to the demands of diversity may abate under Trump, says Peter Cappelli, professor of management at the University of Pennsylvania’s Wharton School. “You can still ask for the data, but then not use it,” he says. “I imagine it will be a tactical retreat.”

– With assistance from Patricia Hurtado and Catarina Saraiva



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