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Origination credit as an obstacle to gender diversity in law

October 11, 2019

It’s well known that bringing in new business remains key to long-term success at most law firms. It doesn’t matter how hard you work or how successful your cases are, credit for originating new clients is what leads to advancement to the most coveted leadership positions, equity partnership and higher remuneration.

It’s also well known that women have historically inherited fewer of the firm client relationships and opportunities than men, often (though by no means exclusively) because senior male partners habitually choose to mentor other male lawyers, and because of other structural issues embedded in the legal world, especially in larger law firms.

Even as law firms take steps to close this gap through mentorship programs—and even as clients insist on change--the impact of this historic gender gap is stubbornly persistent, as highlighted in a recent Law.com article.[1]

Law firms often award origination credit on a perpetual basis, so male lawyers—who benefited from mentorship and inherited clients—even years later stand to receive the credit for new matters that they may not be involved in and for client contacts that they may have never actually met.

In-house counsel express understandable frustration at the archaic origination credit practices impeding efforts to promote diversity and inclusion within the firms with which they work.

One in-house lawyer introduced a survey within her RFPs to ascertain the diversity of the lawyers she was working with as well as who would be receiving the origination credit and billing for the matters she was bringing. The survey quickly highlighted that the woman she knew as her point of contact was not receiving any origination credit.

It’s plainly nonsensical to award origination credit in perpetuity, and one would be hard-pressed to imagine how awarding permanent economic rights to a client relationship would benefit that client.

Clearly, clients can help address the specific problem of origination credit and the larger issue of the persistent gender pay gap in law by exercising their power of the purse. Simply put, clients can ask how the firms they work with award origination credit and decide not to work with firms that do not award origination credit to women who have arguably earned it.

Clients can also leverage other types of economic levers—for example, The Equity Project also provides a lever to clients to insist on change.

The Equity Project is a $50 million pool of capital earmarked to finance commercial matters led by women lawyers, where the litigation or arbitration is being led by a woman, where a woman receives origination credit or is the client relationship manager, or where the case is run by a women-owned firm.

With financing from The Equity Project, women lawyers can pitch alternative fee arrangements and demonstrate to clients that it’s possible to fund their litigation without adding additional pressure to their balance sheet—giving women a competitive edge to help them win new clients and procure that all-important origination credit.

The Equity Project also provides a lever for clients to insist on change. They may access Equity Project capital for matters they award to law firms on the proviso that a woman lawyer is receiving origination credit, serving as client relationship manager, or leading the case—which presents an incentive to law firms to promote women and to ensure that the lawyers actually working on their matters are being adequately compensated for bringing in new business.

With mounting pressure from initiatives like The Equity Project as well as GCs demanding greater transparency from their outside counsel as to who is receiving the credit (and ultimately compensation for) their matters—it is likely that we will see law firms discussing more candidly how they allocate origination credit. As a result of this increased transparency, in-house counsel will be able to more effectively pursue their diversity and inclusion goals which will logically result in greater levels of gender equality.

[1] https://www.law.com/delawarelawweekly/2019/09/04/change-at-the-start-405-43662/?kw