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Clients Step up Diversity Monitoring

By Katherine A. Wittenberg, Litigation News Associate Editor – November 5, 2008

New methods to monitor law firm compliance with corporate diversity mandates are underway, including the use of software, more stringent reporting requirements, and, in some cases, bonuses.

As early as 1999, chief legal officers (CLOs) of about 500 prominent U.S corporations recognized the need for diversity and signed the “Diversity in the Workplace—A Statement of Principle.” That statement included the warning to outside counsel that the CLOs “expect the law firms which represent our companies to work actively to promote diversity within their workplace.”

“In making our respective decisions concerning selection of outside counsel, we will give significant weight to a firm’s commitment and progress in this area,” the statement says.

Although the statement of principle was intended to be a mandate for law firms to make immediate and sustained improvement in ensuring diversity in its ranks, by 2004, objective assessments of the goal showed that law firms had reached a “disappointing plateau.”

Encouraged by Sara Lee Corporation’s General Counsel Roderick A. Palmore, Minneapolis, MN, who authored “A Call to Action—Diversity in the Legal Profession,” [PDF] the corporate CLOs reaffirmed their commitment to diversity, threatening outside counsel that “w[e] further intend to end or limit our relationship with firms whose performance consistently evidences a lack of meaningful interest in being diverse.” Now corporations are taking it one step further with stricter scrutiny in monitoring compliance.

Enforcement of the Diversity Mandate
To ensure enforcement of the diversity mandate, corporate clients “at different levels, have asked—or in some cases, demanded—that their law firm have diverse legal talent working on their matters,” says Ava E. Lias-Booker, Baltimore, MD, Section of Litigation Corporate Counsel Committee member.

Wal-Mart Stores, Inc. (NYSE: WMT) will be using software to confirm the number of diverse attorneys working on its legal matters and the number of billable hours and fees attributed to those lawyers. Microsoft Corp. has announced a diversity initiative that will give bonuses to outside counsel based on their inclusion of minority and women attorneys.

Such compliance monitoring “has had a solid impact on law firms to get them thinking about how they can diversify their ranks and make sure the work done by diverse attorneys is substantive,” Lias-Booker says.

As an outside counsel for Wal-Mart, Lias-Booker says that her firm provides annual reports to Wal-Mart that include information regarding which attorneys are actually working on the projects, how many hours, the duration of the assignments, and the legal fees attributed to the attorney. The reporting is necessary to confirm that women and minority lawyers representing Wal-Mart are engaged in substantive work for the client.

“Many clients are requiring diversity in the outside legal teams that represent them,” notes Patricia Lee Refo, Phoenix, AZ, member of the ABA House of Delegates and former Section chair. “Some require ongoing reports to ensure that their firms follow through on their diversity commitment, and insist that their outside firms report specifically on the number of women and lawyers of color who are in lead roles on the client’s matters,” she says.

Diversity as a Business Decision
Diversity in the legal profession has become a business decision, not merely a politically correct concept, as law firm clients are willing to use their commercial clout to enforce specific goals for recruitment, retention, and responsibility given to minority and female attorneys.

One signatory to the Call to Action, the Williams Companies, Inc., (NYSE: WMB), an Oklahoma-based Fortune 200 energy-sector company, “got serious about diversity and inclusion as part of our company strategy when we began examining the changing U.S. workforce demographics and how those changes would impact our own workforce profile when many of our current employees retire,” says James J. Bender, Tulsa, OK, Section of Business Law Corporate Governance Committee member and Williams’ senior vice president and general counsel.

“We expect the same commitment to diversity and inclusion [from] our business partners,” Bender notes. Williams ensures compliance with its diversity and inclusion mandate by “measur[ing], monitor[ing], and review[ing] scorecards with just as much rigor as we approach other strategic work within the business,” says Bender.

The trend for clients to demand diverse legal teams will certainly continue, Lias-Booker forecasts. In the 22 years that she has been practicing, “there has always been a desire to see diversity, particularly in private firms,” she notes.

Although some firms may have simply paid “lip service” to the principles of a diverse legal staff, “there has been a real push by clients for law firms to diversify and to do it faster. Wal-Mart has been a leader” in this push by among things, enforcing compliance with its diversity mandate, Lias-Booker says.

The reality of diversity in American culture is another reason clients may be encouraging diversity in outside counsel. “As our nation, and our juries, continues to become more diverse, clients want their trial teams to reflect that diversity,” Refo explains.

“Diversity among our outside counsel provides diversity of thought, different approaches, diverse backgrounds [and] perspectives, and varying styles that enable more innovative and creative problem solving,” Bender says.

Client’s Insistence on Diversity and Achieved Real Results
Efforts by client to encourage diversity in their outside law firms has resulted in an increased sensitivity to diversity within the legal profession, especially in large private firms. A 2008 survey of large U.S. law firms in the AmLaw 200 by Altman Weil (the Law Firm Diversity Directors Survey 2008 [PDF]) reports that 58 percent of participating firms have a designated diversity manager or director, up 8 percent from 2007, and 13 percent from fall 2005 when the first Diversity Flash Survey was conducted. In addition, 100 percent of participating firms report having a Diversity Committee, up from 96 percent in 2007.


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