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How Big Law Aims to Make Good on ‘Meritocracy,’ Lessen Pay Gap

June 2, 2022, 8:45 AM

Editor’s Note: In this second piece in our series on Big Law and Pay Equity, Roy Strom examines how law firms and other legal industry stakeholders are innovating to achieve greater equity for women and diverse attorneys. From rethinking firm succession plans and origination credit systems to more closely monitoring work allocation disparities, some firms and companies are giving seemingly intractable equity issues their best shots.

Big Law firms are responding to the growing pay gap among equity partners by trying to increase opportunities for women and diverse attorneys to move up the ranks.

Firms are hiring managers responsible for making sure that assignments are doled out more equitably, and using technology tools to track that progress. They’re also responding to clients pushing for more diverse teams.

Those efforts have yet to make a dent in the pay gap. Women equity partners are paid about 78% of what men make at Big Law firms, according to a survey released in April by the National Association of Women Lawyers. The gap has widened over the last 15 years, the group found. A woman was the highest-compensated partner at only 2% of firms surveyed.

“These issues have been around for such a long time and the answers have been written about for such a long time that it surprises me that we are where we are,” said Lauren Rikleen, the author of a 2013 pay equity report for the American Bar Association. “Firms don’t need a special technology or some kind of special new product. They simply need to care enough.”

Making equity partner is a lucrative accomplishment that comes with a share of the firm’s profits. Many firms tap lawyers for a separate class of “partner-in-name-only,” positions that come with the partner title but not a piece of profits. Those ranks have ballooned over the past decade.

Firms have done little to address what advocates have been saying for years is at the root of pay disparity: antiquated compensation systems, especially when it comes to giving credit to lawyers who bring in new business and those who expand work for existing clients.

Partner Pay

Partner pay systems vary by firm.

Equity partners generally receive a share of firm profits determined by how many hours they bill, the amount of work they generate, and the total billings “their clients” generate across the firm.

Many firms don’t openly share how much each partner makes. The “black-box” approach—in which compensation is set by a small handful of decision-makers and partners don’t know how their pay compares to colleagues—has been unsuccessfully challenged in court in lawsuits against Jones Day and other firms.

Rikleen’s pay equity report for the ABA detailed 12 steps, complete with checklists, for creating more inclusive compensation systems. Making the pay process more transparent for lawyers, putting more women on committees that decide compensation and reporting to the firm’s lawyers on progress closing the gap were among the steps she recommended.

Little has changed more than a decade after the pay equity report was issued. Even when women progress to partnership, they’re still significantly underpaid compared to men.

“We have to at least try new approaches to address the gender pay gap,” said Roberta Liebenberg, a former chair of the American Bar Association’s Commission on Women in the Profession and a longtime leader in diversity and inclusion efforts in the law. “Let’s put all new ideas out there. Let’s try all new things.”

Who’s Getting the Work?

One tactic gaining momentum is developing more rigorous systems to ensure women and underrepresented groups are being staffed on important matters.

More opportunity, in theory, will lead to more women partners. Currently, women account for less than a quarter (22%) of equity partners at law firms, NAWL’s most recent data show.

Bryan Cave Leighton Paisner recently introduced a pilot program in its litigation department that uses software to help staff matters. The program allows associates to enter their skills, availability, and and the opportunities they are seeking. Partners enter their new matters, and a resource manager connects associates to the jobs.

The program, which is a partnership with BigHand Resource Management, was developed to improve efficiency in work assignments, Tommy Shi, the firm’s US director of inclusion & diversity, said. It’s also intended to help women and diverse associates get better work opportunities.

“Work allocation is simply another tactical step we’re undertaking in a whole broader spectrum of getting towards, ideally, a fair and equitable work environment,” Shi said.

Over the last six months, Vinson & Elkins has hired a team of seven “attorney development professionals” to monitor assignments and ensure that diverse associates get a fair shot at work opportunities. The staffers, embedded in practice groups, will track productivity—hours billed—and engagement opportunities, like shadowing partners and being involved in client pitch meetings.

“We’ve made the policy decision that we’re going to have to take a more interventionist or active approach,” the firm’s chair, Keith Fullenweider, said.

Matthew Taylor, chairman and CEO of Duane Morris, said his firm’s chief diversity officer speaks monthly with practice group heads to ensure fairness in work assignments. The firm focuses most on providing equitable representation for its top 50 clients.

“The opportunities have to be there,” Taylor said.

Duane Morris uses a tracking tool to monitor the hours the firm’s lawyers are working from a gender and diversity inclusion perspective, he said, noting the tool is “pretty simple.”

“It’s just an awareness and then saying ‘I’m very intentional that we want to see whether we’re putting our money where our mouth is and that our diverse lawyers are in the mix in getting the work that that is going around,’” Taylor said.

Squire Patton Boggs this year made diverse staffing part of its partners’ annual review process, making partners responsible for equitably staffing assignments for associates. The firm tracks utilization metrics to ensure partners are giving adequate opportunities to women and diverse associates, Fred Nance, the firm’s co-managing partner, said.

Part of the problem is that partners “naturally gravitate” toward people who remind them of themselves, said Nance, who will lead the firm’s office of diversity equity and inclusion when his term as managing partner expires at the end of the year.

“If you have a status quo that’s not as inclusive as you’d want it to be, people have to be mindful and purposeful of stepping outside of their natural comfort zones,” Nance said.

Jonathan Hurtarte / Bloomberg Law

Mintz tracks opportunity and compensation, managing partner Bob Bodian said in an interview. The firm is preparing to audit its pay, hiring, retention and other practices to look for areas where it can improve equity and diversity, he said.

“The problem is not that partners are being paid differently for the same work, it’s that there’s never been a level playing field,” Bodian said. “The challenge is creating all of the right opportunities. That’s why we look at who is on the pitch teams and who is getting credit.”

SimpleLegal, a legal tech software company whose customers include Instacart, Fender and Crocs, released a diversity, equity and inclusion tracking and reporting tool in April. The tool allows legal departments to receive real-time updates on the diversity of the law firm lawyers working on their projects. The data can be used to push back on rates or demand more diverse teams, the company says.

Eric Elfman, CEO of SimpleLegal’s parent company Onit, said many companies are still reluctant to use diversity metrics for hiring decisions, but noted “it’s all going [that] direction fast.”

“The only way this ever changes is if the buyer changes, and that’s what’s happening here,” Elfman said.

Diversity Lab, an organization that develops new ideas to boost diversity and inclusion in law firms, is working with 30-plus legal departments to track, measure, and increase the inclusivity of their outside counsel teams. The Diversity Dividends program asks members to divert work from firms that don’t show year-over-year progress on evaluation metrics such as the overall diversity of teams and the representation of lawyers who receive financial credit for the client’s work.

Participating law departments include HP Inc., Pinterest, U.S. Steel Corp. and XCel Energy.

The goal is to increase leadership roles on matters and to provide billing credit for women and diverse lawyers at more than 260 law firms, with the program’s initial outcomes to be announced this summer, said Caren Ulrich Stacy, Diversity Lab’s CEO.

VIDEO: The two most important pay discrimination laws - the Equal Pay Act and Title VII of the Civil Rights Act - have been around for more than six decades. Yet, the gender pay gap persists. We examine why.

The Path to Partnership

Diversity Lab also has new programs aimed at increasing retention rates for women and racial and ethnic minorities in law firms and increasing the number of women partners in law firms.

Attrition rates for law firms rose to a record 26% in 2021, according to the National Association for Law Placement. While attrition rates between men and women were similar, associates of color departed firms at a 34% rate—up from 18% the prior year.

One of Diversity Lab’s initiatives is the Move The Needle Fund, which launched in 2019 with four law firms that all made specific, metrics-based diversity and inclusion pledges that they’d accomplish in five years. The participating firms are Eversheds Sutherland (US), Nixon Peabody, Orrick, and Stoel Rives.

“Women must have equal access to advancement into the equity partnership and powerful leadership roles,” Caren Ulrich Stacy, Diversity Lab’s CEO, said. “And they must have equal access to credit for new and expanded work as well as any other factors that lead to the highest compensation levels.”

Nixon Peabody’s goal is for its equity partnership to consist of 30% women attorneys, 12% racially or ethnically diverse lawyers and 6% LGBTQ+ lawyers.

Contacted in May, the firm declined to provide data on the diversity of its current partnership, saying that it would release the figures later this year. Rekha Chiruvolu, Nixon Peabody’s chief diversity equity & inclusion officer, said the firm has launched an app that helps partners to assign work to associates to meet a goal of having at least 30% of underrepresented groups staffed on their matters.

The Road to Comparable Compensation

So far, firms have not made much progress changing their compensation structures to promote more equitable pay, said Rikleen, who advises firms on developing diverse and multi-generational workforces through her consultancy Rikleen Institute for Strategic Leadership.

“Leaders want to believe they are in a place where it’s a meritocracy and it’s fair because they want to believe they’re perpetuating a fair place to work,” Rikleen said. “It’s understandable. It just doesn’t hold up.”

Advocates are hopeful that firms will rally around at least one concept that can improve pay equity: ensuring that women and diverse lawyers have an opportunity to inherit major client relationships and the compensation credit that comes with them.

“Origination credit is really the coin of the realm,” Mintz’s Bodian said. The firm changed its credit scheme seven years ago to reduce the points that longtime partners get for the firm’s new work with longstanding clients.

“It used to be where all of the origination credit was being held by people like me: old white guys,” Bodian said. “You bring in a client 20 years ago and you’re still getting the credit even though you might not be working much with them.”

Jonathan Hurtarte / Bloomberg Law

The firm reduced the amount of origination that any single partner can receive to 75%. Bodian said that “makes it easier to get to 50/50,” limits incentives to exclude other partners from client pitch meetings and makes it easier to expand the firm’s “touch points” with clients.

Using succession planning—choosing which lawyers will lead client relationships when rainmakers retire—to close the gender gap may prove effective, but it isn’t a new idea.

“The failure to create clear guidelines around client succession is both economically harmful to women and is not in the long-term interests of the firm,” Rikleen wrote in the 2013 ABA report.

Men have historically inherited more client relationships than women, said Stephanie Scharf, principal at diversity consulting firm The Red Bee Group LLC, and partner at Scharf Banks Marmor.

Scharf and Liebenberg, who’s also a Red Bee Group principal, have done some of the most extensive research on women’s compensation and roles within their law firms.

One study (see second chart) showed senior women view their law firms most differently from men when it comes to recognition for their work, actual compensation, and the methods determining compensation. Men are far more satisfied than women in all three areas, the researchers found.

“Senior women leave their firms because they just don’t feel their work is valued or their firm values them,” Scharf said. “And that’s a phenomenon I believe is increasing today as we enter this post-pandemic era.”

More than 70% of women in that study viewed using client succession plans that emphasize greater inclusion of women as an effective policy to retain and promote women.

It’s an idea that firms have yet to take up on a large scale.

Only 56% of firms even consider the role of inheriting compensation credit and client relationships on compensation, according to the most recent NAWL survey. Even fewer (38%) have established a formal succession planning process or structure.

That kind of resistance is why Paulette Brown, a former president of the American Bar Association and the first African American woman to hold that role, feels law firms need more than new ideas. They need entirely new structures and policies to address the gender pay gap, she said.

“Sometimes you have to metaphorically blow some things up or tear it down just like you do an old, dilapidated building,” Brown said. “You’ve got to build something new.”

To contact the reporter on this story: Roy Strom in Chicago at rstrom@bloomberglaw.com

To contact the editors responsible for this story: Chris Opfer at copfer@bloomberglaw.com; Lisa Helem at lhelem@bloombergindustry.com