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How In-House Teams Are Holding Law Firms Accountable on Diversity and Inclusion

June 4, 2019  |  10 min read

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It’s not enough these days to simply foster a diverse and inclusive workplace. Today’s corporate leaders are increasingly demanding that their law firms, vendors, and third-party partners take a proactive approach to diversity and inclusion—and holding them accountable when they fall short.

Case in point: Recall the dustup after Paul Weiss announced its new partners last year with a photo montage featuring 12 white faces. That led to over 170 general counsel and corporate legal officers penning an open letter to law firms, emphasizing their commitment to "ensuring equality in the legal profession”—and using their sizable outside counsel spend to help achieve it.

“We, as a group, will direct our substantial outside counsel spend to those law firms that manifest results with respect to diversity and inclusion, in addition to providing the highest degree of quality representation,” read the letter, signed by legal officers from Chobani, Etsy, Google, Lyft, Vox, and other tech, media, and financial services companies. “We sincerely hope that you and your firm will be among those that demonstrate this commitment.”

In-house teams are now realizing they have a responsibility to demand diversity and inclusion from outside counsel, and to make sure that those demands are acted on.

Lisa George, Director and Senior Counsel at Discover Financial Services
Lisa George

One company leading the way is Discover Financial Services, whose Law Diversity and Inclusion Committee was formed to develop and implement effective diversity initiatives both within the company and by staffing diverse attorneys and minority- or women-owned law firms on Discover’s legal matters. The committee also supports the company’s use of diverse suppliers and efforts to increase Discover’s and its Law Department’s diversity profile in the industry.

Logikcull recently spoke with Lisa George, Director and Senior Counsel for Discover Financial Services, about the company’s internal and external diversity efforts, including the “scorecard” system it uses to track outside law firm performance.

Diversity Scorecards for Law Firms

Discover uses its scorecard system for outside counsel, according to George, to “measure various components of the law firm’s commitment to diversity.” How did that approach come about?

The company “wanted to get a better understanding of what they are doing to promote diversity within their law firm,” George said of outside firms. That required real metrics “in terms of how well they are doing bringing in diverse counsel. How they are progressing and advancing in the firm and their ability to sustain that diverse talent over a longer term.”

“We are looking at percentages of diverse talent within the firm at different levels. We are looking at what programs they have in place to foster diversity within the firm. We are looking at diverse leadership within the firm. And we are also wanting to make sure that we are getting the best of their diverse bench and making sure that diverse talent is getting credit and getting hours on Discover matters.”

The development of the scorecard has even contributed to other internal initiatives—Discover’s Finance Department incorporated parts of the committee’s scorecard into its supplier diversity checklist.

George was also quick to point out that the outside firms being graded were receptive to the scorecard initiative, and understand it as part of doing business these days. After all, Discover isn’t the only company asking more from outside counsel.

So it’s not as if firms are oblivious to the issue of leadership diversity.

Dozens of the country’s leading law firms have already partnered with incubator Diversity Lab to identify and consider an inclusive slate of candidates for the leadership roles, committees, and activities. The Lab hosts “hackathons” to generate creative ideas that boost diversity and inclusion in law, and created the Mansfield Rule, which asks legal departments to consider at least 30 percent historically underrepresented lawyers for firm leadership roles, from GC and Chief Legal Officer to senior and mid-tier management positions.

The Mansfield Rule certifies that law firms consider at least 30 percent women, LGBTQ+ and minority lawyers for significant leadership roles

Yes, the Rule also encourages focusing on underrepresented lawyers when hiring outside counsel, and Diversity Lab will certify firms that comply with the Mansfield Rule.

Moving From Public Relations to Actual Practice

Still, the numbers on firm diversity are not reassuring. Social media mishaps aside, the numbers of female, black, Asian, and Hispanic partners lag far behind their respective percentages of the associate pool. For instance, Asian Americans comprised almost 12 percent of law firm associates in 2018 (up from around nine percent in 2009), but less than four percent of partners are Asian.

Similarly, almost half of all associates are female, a number that has been more or less steady for a decade. But women occupy less than a quarter of all partner positions, and it’s even worse for minority women, who make up just three percent of all law firm partners.

When accounting for those with disabilities, the numbers are even less encouraging. In 2018, barely one half of one percent of partners were people with disabilities.

“Paul Weiss became the scapegoat for a problem that is bigger than just them,” Diversity Lab’s founder and CEO Caren Ulrich Stacy told the American Bar Association, referring back to the social media backlash that hit the firm after its new partner announcement.

Her company’s data also shows that diverse attorneys “are not advancing to partnership at the same rate as their majority counterparts,” and that lateral partner hires are mostly white males. “If one or both of those levers don’t change, greater diversity in the equity ranks is not possible.”

So, if law firms aren’t changing those levers on their own, can in-house counsel make them do it? Many, like Discover, are trying, according to the ABA:

  • Microsoft’s Law Firm Diversity Program goes with the carrot method, incentivizing outside firms with a bonus if they increase the diversity of their partners;
  • Hewlett-Packard prefers the stick, penalizing firms that do not meet minimal diversity staffing requirements by withholding 10 percent of invoiced fees; and
  • Michelle R. Fang of Turo Inc., who organized the open letter demanding firm diversity, promises the group will follow-up this spring with more signatures and an action plan.

That would be welcome news to Chief Legal Officer of the Association of Corporate Counsel Susanna McDonald and Don Prophete, a partner at Constangy, Brooks, Smith & Prophete. “I hope the signers of the letter keep track of the actions firms take,” McDonald told the ABA. And Prophete went a step further. “Stated in simple English, these signatory letters have been more public relations than actual practice,” he wrote in The American Lawyer. “Except for a handful of GCs, signing on to these letters is a politically necessary thing to do, which ultimately requires zero accountability.” He continued:

“Ask yourselves how many of these same GCs take any real measures to diversify the lawyers they hire on their meaningful matters. Very few do...

“My suggestion, and that of many of my colleagues, is that we should stop these grandiose pronouncements that continue to lead to no real improvement. They are viewed as empty PR ploys, devoid of any real measures of accountability. These repeated statements also lead to diversity fatigue in the profession, which is where I think we are now.”

Instead of putting real pressure on outside counsel to hire, promote, and partner up diversity candidates, according to Prophete, “majority in-house decision-makers hire other majority lawyers with whom they have personal relationships, without regard to race or other reasons. It makes sense to want to work with your friends.”

But just because many GCs don’t do the heavy lifting of enforcing minimum diversity from outside counsel, however, doesn’t mean they can’t. Even Prophete, in posing some hypothetical questions for GCs regarding diversity, gives companies and in-house counsel a road map for pressing firms to make diversity a priority. He asks:

  • How many GCs do you know who have hired, or sought to hire, top racially diverse lawyers to handle matters of high importance to them?
  • If you asked most GCs today to identify by name a single racially diverse outside counsel that the company uses, how many could actually identify that lawyer by name, if such a lawyer actually existed within the company’s pipeline?
  • How many GCs have taken the simple step of identifying the best or most-renowned racially diverse subject-matter experts in the profession for future opportunities?
  • If you gave all these GCs truth serum, how many would have to admit that a majority of the RFPs they send to diverse lawyers are pre-decided before they even send the invitation to bid?

The Efficacy of Diverse Legal Teams

And for George and Discover, the push for greater diversity and inclusion isn’t just altruism, or designed to score PR points. “We definitely see that we get better results with a benefit of diverse perspectives and as a paying client we want to make sure that we maximize the benefit of those perspectives available to us,” she told Logikcull. That said, the Paul Weiss snafu was on Discover’s radar as well.

“I think it highlights the power and influence of the client in terms of the client's ability to choose where they place their business and choosing firms that are committed to diversity. But I think the other thing it highlights is that for even a firm like Paul Weiss that has a good reputation on fostering diversity, it’s still not doing as well as we would like to see.

“And I think that's true for a number of firms. Firms are making good efforts and good progress, but the fact of the matter is that there is still a big problem with in terms of diversity within the legal profession, and the ability of diverse talent to rise through the ranks of law firms and be successful.”

George went from an in-house litigator role at GE to Discover three years ago, bringing experience working on diversity initiatives with her. And she’s especially excited about the company’s mentoring program, a partnership with four of Discover’s core litigation firms. The program pairs two diverse attorneys from each firm with in-house attorneys during a six-month pilot program that gives them a chance to work on Discover matters as well as one-on-one feedback on what is important to the company as a client and why they call certain firms and lawyers.

Discover is “hoping that giving them that direct client perspective will help support them in their careers within the firm,” George explained. “This is all looking at trying to address this problem that we see as a client, where law firms are having trouble retaining diverse talent. We hope that by helping these associates to build a solid client relationship, we could perhaps be helpful in supporting our law firms and the development of diverse talent.”

“We hope that by helping these associates to build a solid client relationship, we could perhaps be helpful in supporting our law firms and the development of diverse talent.”

George also highlighted the dual-focus of diversity efforts, both within and outside Discover. “There certainly efforts that can be made in terms of focusing in house and making sure that your own house in order,” she said, “making sure that there is a good representation of diversity within the company.”

But the responsibility goes beyond one’s own company. “I think looking at external relationships is helpful, too, in terms of making a difference between particularly within the legal industry where we know diversity is an ongoing challenge.”

Corporate Legal Diversity Initiatives

“It is not enough to commit your firm to diversity during the recruiting process or to hire a diversity and inclusion officer and expect that person can effect change without the full commitment of each member of the firm,” according to that sternly worded letter from high-profile GCs. “Instead, the reality is that you must consciously and personally invest in diversity and inclusion and interview, hire, mentor, support, sponsor, and promote talented attorneys who don’t always look like you or share your background.”

Therefore, diversity efforts may need to go beyond mere numbers on scorecards and certification. Firms need to ask themselves how they define diversity, how they target specific demographics for recruitment and retention (and whether any might be overlooked), and how broadening definitions of diversity might impact their goals.