A year after renewed diversity demands by general counsel from around the country, more law firms appear to be taking notice, taking stock and taking action.

While it’s too early to tell if recent movements such as Sara Lee’s Call To Action are forcing significant changes, observers and insiders say tough-talking initiatives such as these are keeping diversity efforts at the fore, spurring innovative programs and more thoughtful long-term plans aimed not only at hiring but also at moving more minority attorneys to the top.

Since last year, more than 100 general counsel of Fortune 500 companies have signed on to the Call To Action, started in 2004 by Sara Lee’s general counsel, Roderick Palmore.

The statement ups the ante of previous diversity pushes by promising to cut off business to outside counsel if law firms do not show progress with diversity.

But it remains an open question whether this and similar efforts will cause a fundamental shift in law firm hiring and how they staff legal matters.

“Are we seeing the numbers changing at law firms? I think that it’s too soon to tell,” Palmore said. “A year is a fairly short time to measure impact, even if we had the uniform measurement tools, which we don’t yet. We’ve been talking about it informally and we need to formally begin that discussion.”

Although some inroads have been made in law firms regarding diversity, the National Association of Law Placement in Washington, D.C. reports that attorneys of color account for only 4.32 percent of all partners at major U.S. law firms – even though the percentage of minority law school graduates has doubled, increasing from 10 percent to 20 percent since the late 1980s.

Not everyone is on the same page – or even reading the same chapter – when it comes to diversity, however.

An interesting juxtaposition of values is seen in this year’s 16th annual Survey of General Counsel by Corporate Legal Times/LexisNexis Martindale-Hubbell. The survey revealed that 55 percent of law firm attorneys believe that diversity initiatives are not important to in-house counsel and most law firm lawyers said they did not think diversity would be a deciding factor in getting business.

On the other hand, nearly a quarter of general counsel surveyed said that diversity is an important criterion in selecting a new firm.

This disconnect could be deadly for law firms.

While there hasn’t been any wholesale firing of outside counsel over the diversity issue, firms are beginning to lose business if they put off the diversity issue.

Wal-Mart Weighs In

Wal-Mart, the nation’s biggest retail giant, this spring said it is parting company with law firms that do not live up to its diversity expectations.

Wal-Mart General Counsel Thomas Mars caused a stir when he asked the retailer’s top 100 law firms to each present a list of three to five attorneys to be considered for slots as Wal-Mart’s “relationship” attorneys. He gave them a month to come up with the list, with instructions that each slate should include a minimum of one minority and one woman from which the corporation would choose.

“We’re very serious about diversity,” said Wal-Mart spokeswoman Linda Blakely. “We asked the top 100 firms to join us in the effort, to be partners in this endeavor. I’m pleased to say that most firms want to join us. But not everyone has chosen to participate. This is a choice they make, and in those cases we have looked to other firms to do business with us.”

Mars said he decided he had to make changes a few years ago when he came onboard to discover that 82 of the 100 relationship partners from the corporation’s top 100 outside counsel were white males.

Others big companies are also routinely demanding more of their outside counsel on diversity issues.

Many Fortune 500 companies are asking for monthly diversity updates, said Veta Richardson, executive director of Minority Corporate Counsel Association based in Washington, D.C. She said it is no longer enough to simply raise the number of minority lawyers in the lower ranks.

“Corporations are making diversity a fundamental part of their decision making in giving out business and it’s getting the attention of law firms,” said David Hall, a law professor at Northeastern University in Boston. “Their clients are asking for information on diversity and they have to respond. Their clients are asking for more accountability.”

Clients are asking for substantive changes. They want minority attorneys in the top tiers and they want them as relationship partners. Requests for proposals now routinely ask for diversity information and ask for a law firm to explain how it plans include minority attorneys to staff the client’s matters.

“Some firms are still on the learning curve of what to do, but more firms today seem to be serious about diversity,” said Richardson. Firms are adding mentoring programs, recruitment and retention programs and hiring management firms to review their “blind spots” and recommend changes.

As a measure of the interest in diversity, she said that in 2001, when the association began presenting its Thomas Sagar awards for firms that demonstrate sustained commitment to hiring, keeping and promoting minority attorneys, MCCA officials had to scramble for applicants.

“We had to seek law firms out to get them to apply. That has changed. This year we had an overwhelming number of applicants, including many firms that we hadn’t heard from before,” said Richardson. “It’s an award for firms with diversity programs that exceed national standards, firms that go beyond, and what this shows is that there are many firms out there proud of their diversity programs.”

Gone are the days when corporate clients were reluctant to ask about diversity considering it to be an internal business matter at law firms, said Robert Haig of Kelley, Drye & Warren in New York City.

An example: The New York County Lawyers Association’s Diversity Statement has nearly doubled its signatories of the nation’s top law firms since this spring when it boasted 60 participants. In September, that number had swelled to 114, Haig said.

Simply put, the signatories agree to tell their corporate clients – and even allow the data to be published – diversity information such as the composition of legal teams by race, gender, ethnicity and sexual preference.

Haig was among the association’s task force on diversity that came up with the pact, which began circulating in 2000 but picked up steam this year.

It reads in part: “We believe that law firms should not object to requests by their corporate clients that the firms report the number of hours devoted to the clients’ matters by minority lawyers. If our clients decide that they wish to publicly report the amounts of legal fees which they pay for services rendered by minority lawyers as emblematic of their commitment to increasing diversity in the legal profession, we would work with them to provide such numbers or estimates.”

Haig explained: “It’s one thing to sign on to aspirational diversity statements, saying that you subscribe to diversity. But that’s been going on now for 15 years. Everyone agrees that we still have a lot left to do when it comes to diversity. The one thing that we felt would really move diversity forward is quantification, specific numbers of what individual firms are doing about diversity that would be exchanged with their corporate clients.”

It’s All About the Numbers

The bottom line, he said, is that diversity data could make or break a contract.

“Everyone can sign a diversity statement, but the only real thing that matters is the numbers,” he said. “If a law firm has 25 percent minorities working on a client’s matters, that says one thing. If it’s four percent, it says another.”

He said that corporations are increasingly aware that diversity is a plus in the global and domestic market.

“They see that not only is it morally and ethically correct but that if you have diversity in the workforce you will be more in touch with the community, with customers, with suppliers, and quite frankly with judges and jurors if need be,” Haig said.

When corporate counsel ask for diversity information, and ask for updates, and ask why their legal business isn’t staffed by more minority attorneys, law firms have to show they’re more than talk, added Trish Butler of Howrey in Washington, D.C.

Butler chairs the diversity committee at Howrey, which recently was ranked by the Minority Law Journal as the top law firm in Washington, D.C. in minority attorneys and seventh nationwide in minority partners.

“It keeps the pressure on. It makes law firms take a harder look at themselves, at how they’re staffing their cases,” Butler said. “It’s revitalized our own commitment to diversity. Internally, we’re already pretty strong. But now we’re asking ourselves what more we can contribute to the dialogue. We feel diversity is an issue that needs continuous attention. You have to continuously discuss where you are and where you want to be.”

To that end, Howrey recently sponsored a Diversity Summit in September, with dozens of attendees from companies such as Dell Inc., BellSouth, Coca-Cola Company and Shell Oil Company, who gathered to talk about best practices in creating diversity. Butler said the summit will be an annual event.

As law firms try to compete for lucrative contracts, more are touting diversity to get clients’ attention and attract new minority recruits, said Peter Marx of Legal Insight Media in Boston. He said in the last few months several law firms have hired his company to add to company websites videos featuring minority attorneys and leaders talking about their experience at the firm.

“We’ve done [videos] for a lot of other topics, but this is new,” Marx said. “Whether it’s for law students or clients, the law firms want to show they have a true commitment to diversity. If you’re a top law firm, the clients know you have the expertise. This is a way to differentiate a law firm.”

New Opportunity

The recent diversity buzz also created an opportunity this year for Regina Molden and her partners that didn’t exist even five years ago.

In an effort to address clients’ concerns about racial diversity, Atlanta-based Womble, Carlyle, Sandridge & Rice recently announced in one of the first deals of its kind in the nation that it is allying with Molden, Holley, Fergusson, Thompson & Heard, a newly formed Atlanta boutique firm of eight African-American lawyers.

Molden said her firm knew it wanted to partner with a larger firm to access larger clients and support staff when the attorneys – all with big-firm experience – got together earlier this year. Once word got out about their plan, they had their choice of suitors, Molden said.

“The timing was perfect. Five years ago, even three years ago, I don’t know that we could have approached Womble Carlyle or any other large firm and have them embrace us,” Molden said. “But this year, it was the other way around and we were doing the picking and choosing.”

Womble Carlyle, whose clients include Sara Lee and Wal-Mart, wanted to increase its racial diversity and answer clients’ calls for greater diversity and minority attorneys working on their business matters. Molden said that her firm will also help Womble with mentoring of minority attorneys. The two firms will work together with clients as co-counsel but will remain separate firms, Molden said.

“Minority groups are growing by leaps and bounds and corporations recognize that and they are calling for changes,” she said. “They’re telling the law firms if you don’t improve you won’t be getting our business.”

Despite some encouraging signs, even those who are energetic supporters of diversity say much more needs to be done – and it isn’t going to be easy to get there.

“We are seeing some progress but the issue of diversity just doesn’t go away because you made a few important hires. You have to focus on it constantly, you have to make institutional changes,” Hall said.

And recent trends in law school enrollment may make the job even harder in the future. Last year’s law school enrollments showed a one percent decline in minority enrollment, according to statistics recently released by the country’s top 19 law schools.

“There’s been a decline and no one seems to have a complete explanation for it,” Hall said, adding that he is also concerned about challenges on the horizon to affirmative action programs. “These could make it harder to get minority attorneys in the pipelines and diversity at law firms could be an even greater challenge.”

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