New England Biz Law Update
It didn’t take long for dozens of corporate counsel at large companies to sign onto a recent “Call To Action” urging them to pressure outside counsel on diversity hiring and retention campaigns, with many on board before the final version went out in August.
But unlike earlier initiatives that simply sought a commitment to diversity from outside counsel, this pledge promises to yank business from outside law firms that do not make diversity progress and give it to those that do.
The latest initiative aims to revive enthusiasm for the mission of creating diverse law firms, both among general counsel and outside counsel, after several years in which they admit the cause has flagged.
Still, counsel interviewed said that impediments to breaking through the apathy remain powerful.
Indeed, a recent survey of senior in-house counsel conducted on behalf of Kirkpatrick & Lockhart revealed that diversity remains a much lower priority when deciding which outside law firms to hire as compared to factors like billing rates and effective communication.
It appears that leaders must not only convince outside law firms of how serious they are when it comes to diversity, but they also have to convince many of their own colleagues to get serious about the issue.
In the strongly worded Call To Action – authored and circulated by Chicago-based Sara Lee’s General Counsel Roderick Palmore – the pledge calls for top legal officers to make clear they want to see results, or the consequences will be financial.
The pledge states: “We pledge that we will make decisions regarding which law firms represent our companies based in significant part on the diversity performance of the firms. We intend to look for opportunities for firms we regularly use which positively distinguish themselves in this area.”
Click here to read the full text of the Call To Action.
It is the last line of the three-paragraph document that gives it bite: “We further intend to end or limit our relationships with firms whose performance consistently evidences a lack of meaningful interest in being diverse.”
Palmore began sending the Call To Action to general counsel at Fortune 500 companies at the end of the summer asking them to join the initiative.
“I am disappointed with the lack of progress the profession has made on diversity,” Palmore said in an interview with New England In-House. “Some gains have been made, but most of those gains have leveled off and there did not seem to be much spark or interest in making further progress. I do think this is an important topic to my colleagues. Sometimes all you need is the right prompter.”
Although the movement is only months old, more than 50 general counsel from Fortune 500 companies have put their support behind it, said Susan Hackett, general counsel of the Association of Corporate Counsel. More than 30 had signed before Palmore officially began circulating in August.
The Washington, D.C.-based ACC is backing the initiative, along with the American Bar Association and the Minority Corporate Council Association (MCCA). The ACC plans to promote the Call To Action at its annual meeting in Chicago on Oct. 25-27, and to feature it on its website at www.acca.com.
Hackett said the Call To Action pledge is not meant to be a do-or-die threat.
“It’s not about meeting a magical number or you’re fired. It’s not you have two weeks to change or you’re fired,” she said. “It’s about being able to show progress, over time, that diversity is as much of a priority for you as it is for me. If you don’t take that seriously, you’re on probation. If you don’t get yourself in order, then new projects and work will go to firms that can.”
MCCA’s Executive Director Veta Richardson added, “This is meant to be a wake up call.”
Plateau
While some strides have been made in creating a multi-cultural legal profession, Palmore wrote in his Call To Action, “All objective assessments show that the collective efforts and gains of law firms in diversity have reached a disappointing plateau.”
In a recent interview, Palmore said the profession needs to shift its notion of diversity: “There has been a tendency in general to think of diversity and quality as two separate ideas. There remains that underlying notion that diversity means dilution in quality. Even if it’s not the text of the conversation, it’s the subtext. That is part of the reason why whenever the topic is raised what follows closely behind is, ‘What is the business case?’
“A big part of the challenge, “he continued, “is to get people to come to grips with the notion that diversity means diversity of talent, diversity of ideas, having a more creative team. If you have people sitting around the table, all from the same background and the same perspective, you are likely to get fewer ideas about a particular topic than if you have people a myriad of experiences and perspectives. Generally, the more ideas on the table, the better the end result.”
Diversity proponents had hoped an earlier initiative – the Statement of Principle put out by BellSouth in 1999 – would have yielded better results. Despite the fact that statement was signed by more than 300 general counsel pledging to make diversity a priority when hiring outside counsel, progress has been less than earth shattering.
“With the Statement of Principles the thinking was that things would improve,” said Don Liu, general counsel at IKON Office Solutions and an MCCA board member. “A lot of general counsels signed it. A lot of them say they care, but they haven’t really been pushing for diversity progress,” Liu said.
“I’ve had very frank discussions with many general counsel,” he revealed, “and although they say publicly they support diversity – it would be politically incorrect for them not to say so publicly – privately they say they don’t understand how it helps the overall business. If they don’t understand it, they’re going to have a hard time following through on it.”
A 2003 study by the U.S. Equal Employment Opportunity Commission showed that law firms made progress hiring minorities and women but that that progress had yet to transcend to the upper levels.
Women now account for 40 percent of lawyers at larger law firms and minorities make up 12.6 percent. Women and minorities are scarcer at the upper levels: The numbers drop drastically at partner level. The study found that white men are five times more likely to make partner than women, four times than Hispanics and seven times better than blacks or Asians.
The numbers also showed that representation of women and minorities lags behind the makeup of graduating law school classes, which are made up of about 50 percent women and 25 percent minorities.
Low Priority For Many
A recent “Top of the Mind” survey of senior in house counsel sponsored by Kirkpatrick & Lockhart revealed that general counsel at Fortune 500 and Fortune 1000 companies ranked diversity between 3 and 4 on a scale of 1 to 10 of priorities considered when hiring outside counsel.
Hourly rates, effective communication, team work and enjoyable attorneys all ranked 6 or higher.
“Our survey suggests that while the efforts of Rick Palmore and others are laudatory and well-intentioned they may regrettably be running into a brick wall,” said Peter Kalis, chairman of Kirkpatrick & Lockhart, which has an office in Boston. I think it shows the magnitude of the challenge out there to make this happen.”
In its second annual survey, conducted by The Brand Research Company on behalf of Kirkpatrick & Lockhart, about 150 in-house counsel were questioned about among other issues their priorities when hiring outside counsel.
Palmore remains convinced that his colleagues care about the issue of diversity.
“I do think this is an important topic to my colleagues. So far the reaction has been very positive,” said Palmore. “What I am hopeful will happen is that once these general counsel have committed that they will take that commitment, they will put systems in place that are appropriate for them and their companies to ensure they can honor that commitment.”
MCCA’s Richardson said the statistical pictures show that diversity efforts definitely need a boost.
“The Call To Action is an important leap. It’s the next step for the general counsel community after BellSouth’s Statement of Principle,” Richardson said. “This Call To Action is a more informed phase because general counsel can look at diversity progress in many measurable ways.”
She said five years ago it was controversial to even ask for diversity statistics, but general counsel now routinely request and access all kinds of diversity information. Law firms can tap into databases of information now being compiled by a variety of groups.
“Some people felt it was inappropriate to ask for numbers, to ask, for instance, how many hours were billed by minorities,” she said.
Companies also do not have to create programs of their own, but can look to others for examples.
Palmore, for instance, has set up a system at Sara Lee designed to weed out low performers. Sara Lee ranks its outside counsel into three tiers, with the bottom layer being told they have a year to show progress on diversity or they will get less business. Those at the top are considered preferred counsel, and they are given more work.
“GCs at Fortune 500 companies are bellwethers. What they do moves the industry,” Richardson claimed. “What general counsel are saying is that there will be winners and losers and a firm places itself at risk for losing business in the long run if it does not manage diversity well. Diversity gives you an edge. In the competitive world we live in, an edge is important.”
The ‘Action’ Part Is The Hardest Part
While the Call To Action is attracting attention and signatures, the question remains whether it will translate into action by general counsel who haven’t already been acting.
Liu predicted getting people to sign would be easy. Getting them to stay the course will be trickier.
“If you don’t sign it you’re going to stick out so I think you will have many signing it,” Liu said.
To Liu diversity makes good business sense all around. He said IKON already uses diversity as top criteria when hiring outside counsel and other suppliers. He said quality and expertise are never sacrificed, while many law firms offer quality and expertise. Only some offer diversity above and beyond that, he noted.
Liu worries that the Call To Action runs the risk of turning out similar to the Statement of Principle, with lots of signers but few doers.
“There is a contradiction between what many general counsel have said they would do versus how they have acted,” Liu said. “In fact, most companies have programs to get their suppliers to be more diverse and from what I hear the ones that very often give them the most difficult time are from their own legal departments.”
He said that while initiatives such as the Call to Action focus needed attention on the dilemmas facing diversity initiatives, in order for change to take truly root it must come from the top levels.
“For general counsel to take this seriously, this kind of change needs to come from CEOs, and they have to see that this just isn’t the right thing to do, but that it’s the smart thing to do,” Liu said.
He added that the diversity movement itself needs to be more diverse.
“It can’t only be the minority general counsel. We need to have the general counsel that are from the majority to help take the lead,” he said.
What About Smaller Companies?
Fortune 500 companies have a lot of business dollars to use as clout. But what of general counsel at smaller companies who are interested in getting behind this initiative?
“Certainly your range of influence is not as great if you are at a smaller company. But you still have purchasing power and every lawyer can be an agent for change,” Richardson said.
A simple way to promote diversity, she said, is for attorneys to widen their networks to include many minority lawyer contacts.
“Being a leader doesn’t mean doing what’s comfortable. The minority bar association is not closed to whites. The women’s bar association is not closed to men. Go meet people. Get to know lawyers who are well qualified but not solely heterosexual, Christian, white males,” she said. “When it comes time to hire, you’ll remember that minority lawyer with expertise in a certain field.”
Palmore said that although the Call To Action is being targeted at large company general counsel, those at smaller firms are welcomed as well. He said the smaller firms still wield much influence in their respective spheres.
“I would love to have them sign on. My target audience to begin with has been the general counsel of large companies simply because of the influence those general counsel have,” Palmore said. “But at the end of the day I would like to see this spread across the entirety of the profession.”
Palmore said success might be closer than skeptics think.
“There is a general tendency on all sides at companies and at law firms to think of this a big topic, a big rock to move,” he said. “I don’t disagree, but having said that, if everybody who thinks about this issue and thinks it is important does something about it, then I think we’d be very surprised at how good the results could be and what the landscape could look like.”
Law Firm Reaction
Ralph Martin, head of the Diversity Task Force at Bingham McCutchen in Boston, said it’s not uncommon for in-house attorneys to request diversity information.
“Among some general counsel there seems to be intensified interest in finding out not only what our numbers are but what is our commitment to diversity on a sustained basis. They want to know what we’re doing programmatically and what we’re doing with recruitment both at the associate and higher levels,” Martin said.
He said he has not heard of any general counsel outright telling Bingham McCutchen that the firm would lose business if it cannot demonstrate diversity progress.
Martin said initiatives such as the Call To Action and its financial consequences may nudge law firms in the right direction.
“It doesn’t hurt to have external pressure that has a business imperative attached to it but in order for diversity to really be successful and sustainable, change has to be generated by the leadership,” Martin said.
James Reidy of New Hampshire-based Sheehan, Phinney, Bass & Green agreed.
“It will certainly get the attention of law firms who want to get their business,” said Reidy. “Law firms know they have to be sensitive to their clients’ requests.”
He said in the past five years, he’s noticed more businesses asking for diversity statistics and information about diversity programs.
“In the past we’ve only had to provide the information to governments and colleges and universities, but now even private companies are asking us about our programs to make our workforce diverse,” he said.
Although some have suggested the Call To Action initiative may be a heavy-handed way to achieve social justice, Palmore disagreed.
“My response,” Palmore said, “is that it gives embodiment to what people want to do, but even if it is a little coercive then it’s worth that. As a profession we’re far short of reasonable performance and we haven’t gotten there with efforts that were less coercive. Do we settle for the status quo? This ups the ante. If some have a better idea to move the needle, then I’m all for that.”
Kirkpatrick & Lockhart’s Kalis said he’s puzzled that more law firms don’t enthusiastically buy into diversity.
“Given the emerging demographics trends in this country, why wouldn’t you tap into the best wisdom out there? I can’t think of a single reason not to, not to mention that it harmonizes with sound social values,” said Kalis. “My impression is that reason that firms don’t do it is because they seem to have the view that there are no immediate financial rewards.”
While movements such as the latest Call To Action may provide economic incentives for some companies to change, the change will not stick if the companies don’t realize that diversity makes a company more competitive and resilient.
“For us it just makes sense, considering where our clients do business,” Kalis said. “They do business in every nook and cranny of this country and around the globe. We feel that part of being a great lawyer and great law firm is embracing a multicultural point of view. It’s abundantly clear that a multicultural law firm is stronger than a law firm with a monolithic cultural point of view. It makes us stronger now and in the long run.”
(Questions or comments can be directed to the editor at: [email protected].)
