Bloomberg Law
April 3, 2017, 8:31 AM

Companies Use Diversity Data to Hold Law Firms Accountable

Stephanie Russell-Kraft

Corporate diversity programs have come a long way since 1999, when Charles Morgan, then-GC of BellSouth Corp., led a group of his peers to sign a statement promising to consider law firm diversity when hiring their outside counsel. Today, legal departments aren’t just asking firms to field diverse groups of attorneys — they’re asking those firms to put attorneys in leadership positions, and they’re asking for data to back it up.

On Saturday, Facebook began requiring outside counsel to field teams with at least 33 percent women and ethnic minorities and show they are actively creating “clear and measurable leadership opportunities for women and minorities” in the company’s legal matters, the New York Times reported .

The changes have coincided with corporate demands on in-house legal teams to track their spending with greater precision, indicating that the use of data to hold law firms accountable for diversity initiatives will only increase.

Until recently, corporate legal departments have been hesitant to put specific metrics around diversity expectations, despite the fact that they’re already using metrics to track the business aspects of law firm performance, according to HP Chief Legal Officer and General Counsel Kim Rivera. “The concept is not alien,” she said. The only thing changing is that diversity and inclusion are now being measured alongside project budgets, open litigation matters, and staff productivity.

Facebook’s new policy comes on the heels of HP’s announcement in February that it would start withholding fees from law firms that don’t meet diversity requirements.As part of its new policy, the technology giant will withhold up to 10 percent of invoiced amounts from law firms that don’t field at least one “diverse relationship partner” or at least one woman and one “racially/ethnically diverse” attorney each performing at least 10 percent of the billable hours on HP matters. Rivera said she has been contacted by in-house counsel from several other Fortune 500 companies who are interested in implementing similar programs.

The ‘Front-End’ of Diversity

According to Robert Grey, president of the Leadership Council on Legal Diversity, programs like HP’s are the “front-end of what is becoming a much more analytical, data-driven approach to understanding how to develop a more diverse talent pool.” Corporations now have far more data analytics tools at their disposal to track the work and leadership opportunities given to otherwise under-represented outside counsel.

Alan Bryan, senior associate general counsel at Walmart, says his work in legal operations — a role designated to managing the company’s legal matters — has transferred seamlessly to the work of holding the company’s outside counsel accountable to diversity targets.

“Legal Ops is created to address spend, and you do that with the data you have in your system,” said Bryan. “But you can also address diversity at the same time and make it just as imperative as the spend, with the same tools.”

Instead of relying solely on law firms for their reporting of diversity statistics, in-house law departments can now see which attorneys are doing what kind of work. For example, a GC can easily check if a young woman of color is staffed for short amounts of time on document review, or if she’s taking on a leadership role and logging significant hours on more complicated work. Walmart monitors diversity data within its legal matter management system, which can track race, gender, and ethnicity or hours worked per attorney, according to Bryan.

Measuring the Data

Though a representative for Walmart was unable to provide any data on firms that have adjusted their ranks based on the company’s program, Kim Koopersmith said she wouldn’t have become chair of Akin Gump without the retail giant’s intense focus on recruiting women and people of color relationship partners. Koopersmith was the company’s relationship partner from 2009 to 2012, at which point she was elected chair. “There is a gravitas that comes from having significant client relationships,” she told Big Law Business.

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Indeed, one of the most powerful tools corporations have in the effort to increase law firm diversity is their ability to demand who gets leadership roles on their legal matters.

Microsoft, which has had a law firm diversity program since 2008, announced in 2015 that it would pay an annual bonus of up to 2 percent to firms that meet specific diversity targets in their leadership ranks. Last year, Microsoft deputy general counsel David Howard said the company’s law firms had increased “diverse representation” in their management committees from 31.2 percent to 34.4 percent. In particular, he singled out the progress made by K&L Gates, Orrick and Perkins Coie. “Each firm shared with us that the newly refocused [diversity program] provided a real push to expand and refine their efforts,” he wrote in a blog post .

The approximately 50 firms on AT&T’s so-called Preferred Counsel Program, which receive the bulk of the company’s work, are held to high diversity standards as tracked by an annual law firm survey, according to David McAtee, the company’s senior executive vice president and general counsel. “We do hold back some compensation for our outside firms, and the survey — including the diversity element of the survey — is a factor in whether the firms ultimately receive those funds,” he said. McAtee declined to elaborate specifically on the holdback policy.

At NBCUniversal, GC Kimberley Harris takes asimilar approach. She said her team generates diversity statistics on pending matters on a quarterly basis, not only to hold law firms accountable but to hold her senior in-house lawyers accountable as well.Harris said NBCUniversal hasn’t talked about withholding fees or providing bonuses based on that data, but she hasn’t ruled it out.

A representative for NBC declined to provide any concrete statistics about the company’s outside counsel diversity, but Harris said she plans to use the data to prevent young women and attorneys of color from leaving law firms before they ever have a chance to move up the ranks. “Law firms usually do a good job of bringing in diverse classes,” she said. “But when you get to mid-level and people who could be considered for partner, there are very few people left.” Harris plans to work with law firms to identify fourth, fifth and sixth year associates, put them on NBC matters, and develop the kinds of relationships that will put them in a strong position to become partner.

MetLife, similarly, is requesting law firms develop promotion and retention plans to foster diversity, but isn’t requiring specific data or benchmarks.

Skepticism Among Legal Scholars

While there is some indication this new generation of corporate diversity programs might have a greater impact than past pledges,law professors who have studied the history of corporate diversity initiatives remain skeptical.

Stacy Hawkins, who teaches diversity courses at Rutgers Law School, said many such in-house programs have existed over the past ten to fifteen years, and yet law firms have only achieved marginal gains in expanding their rosters and leadership positions beyond white men. “I’m not sure how much these efforts standing alone have generated the kinds of results we want to see more broadly in the legal profession,” Hawkins said.

Deborah Rhode, a law professor at Stanford University, said one problem in-house programs have historically encountered is a lack of enforcement. In a 2015 survey of diversity initiatives at Fortune 100 companies, Rhode found one managing partner out of 23 who reported losing business over a failure to meet a client’s diversity demands. Walmart cut a few firms loose when it began its diversity program in 2005, but hasn’t since then.

Paul Weiss partner Claudine Meredith-Goujon told Big Law Business that only a minority of the firm’s clients audit its diversity statistics after it is engaged. Just a few clients, including HP, have truly robust auditing programs. Corporate diversity programs are “most effective when they demand specific accountability,” including clear benchmarking and regular feedback, she said.

Risks of Tokenism

Without a commitment to developing junior talent, firms alsorun the risk of tokenism,according to Vernā Myers, a diversity and inclusion consultant who studies unconscious bias. “You can’t just put people in places because they have a certain demographic identity,” said Myers. “You have to do all the stuff that is required to make those people ready for those opportunities.” Hawkins said she has heard from Big Law lawyers whose firms staffed them on projects just to satisfy client diversity demands.

The general counsel who spoke with Big Law Business said they are aware of the risk of tokenism and take it seriously.These days, large companies are aware that younger attorneys are only benefiting from diversity programs if they are given real opportunities for advancement, they said.

Kim Rivera said she plans to weed out tokenism in HP’s new initiative.

“If you have a tokenistic approach, you will have that problem but you won’t have it with us, because we’ll throw you off the project,” she said. “If you don’t have diverse teams that are up to the task and engaged and excited about doing the work, we’re going to know that.”

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