Law firm clients should exercise their considerable economic clout to obtain diversity metrics and apply pressure on their external counsel to do everything they can to close the gender gap in law.
These findings are part of a Burford commissioned report—The Equity Project Study—which aimed to understand how companies are exercising their buying power to close the gender gap in law and to offer ideas about what more can be done. The research is based on interviews with 77 general counsel and senior in-house lawyers at companies with median annual revenue of $8 billion.
As part of the study we asked a number of our Equity Project Champions to discuss how GCs can proactively use their “power of the purse” to incentivize law firms to promote more women and improve equity.
GCs should ask law firms to disclose diversity metrics
Although a minority of responding GCs said their companies have formal programs to track the gender diversity of their outside firms, several Champions recommended requiring law firms to provide their diversity data as part of the pitch process to create urgency around change.
“Certain corporate users of arbitration select their outside counsel by demanding that the firms pitching for the work show their diversity numbers… This is a powerful and practical way to place gender diversity as a relevant factor at the center of the beauty parade, at the same level as industry expertise and legal excellence.” – Sophie Nappert, Independent arbitrator, 3VB, and Moderator, OGEMID
“In formal bidding processes, points could be allocated for the firm’s diversity policies and diversity in the proposed team.” -- Noradèle Radjai and Domitille Baizeau, Partners, Lalive
By asking the question, companies can have a better idea of the gender composition of the law firms they work with and make informed decisions on how to apply pressure for change.
Some companies, like Microsoft, have formal diversity programs and policies in place that set goals for the firms they hire. Despite this, The Equity Project Study showed that 80% of GCs and senior in-house lawyers said their companies lacked such a policy. This is a missed opportunity to positively impact the gender diversity problem in law.
GCs should allocate legal spend to firms with diverse teams
Concrete action should be taken by in-house legal departments if gender diversity expectations are not met by the law firms they work with, according to the Champions.
“GCs should use their considerable economic clout to incentivize law firms to promote gender equity and to consider taking away business from those who fail to do so.” -- Roberta Liebenberg, Senior Partner, Fine, Kaplan & Black
“My advice for legal department leaders is this: You hold the cards in good and in bad times. You have the power to reward law firms that manage their talent and sustain their diverse workforces, and to punish the ones that don’t.” -- Caren Ulrich Stacy, CEO, Diversity Lab
In essence, businesses need to use a combination of carrot and stick incentives to drive change.
Many forward-thinking companies are already doing this. A powerful precedent was given by 170 GCs who, in January 2019, penned an open letter to the law firms that represent them: Do more to close law’s gender gap, or risk losing business.
Giving an economic incentive to law firms can help drive change and it makes business sense for companies to demand a diverse slate of outside counsel. Having more women at the top means a greater diversity of perspective, providing a better client service. As numerous Equity Project Champions have noted, it’s a win-win strategy.
“As clients of firms, we in-house lawyers should emphasize—both in terms of feedback and allocation of legal spend—how much we value the intellectual creativity that meaningful diversity, including more women in leadership positions, can promote.” – Jonathan Goldin, GC, Goldin Associates
Interestingly, The Equity Project Study revealed that 21% of GCs said that women litigators’ work is more efficient than men, based on factors such as speed to resolution and/or cost management. Efficiency towards a positive outcome, whether that be a favorable settlement or an ultimate win at trial, provides yet another business case for promoting women litigators and arbitrators.
GCs should ask about origination credit
Understanding how origination credit is awarded is vital to diversity efforts. This is an important question for in-house lawyers to pose, as law firms may award origination credit in perpetuity, such that senior male lawyers receive credit for new matters that they are not directly involved in and for client contacts they have never met.
“Who is getting the relationship credit in large law firms—is it the female or diverse lawyer or some non-diverse man you’ve never heard of?” -- Nicole Galli, Managing Member, Law Offices of N.D. Galli and Founder, Women Owned Law (WOL)
“One of the most important ways that GCs can use their “power of the purse” is to retain women to run their cases and serve as first chairs in any disputes. If women are not provided with such opportunities and direct support by GCs, they will not significantly advance and the gender gap will persist.” -- Carolyn Lamm, Partner, White & Case
Yet the study found that 52% of GCs interviewed said they were unaware of how origination credit is awarded at the firms they work with. One of the reasons GCs are not asking the question may be that they feel a perceived reluctance by the law firms they regularly partner with to share that information. More collaboration is needed between companies and law firms, but GCs should actively pose the question.
The Equity Project
One way GCs can ensure that law firms are putting women into leadership positions on matters and awarding credit where a woman lawyer has rightfully earned it, is through The Equity Project. 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.
In-house lawyers may use Equity Project capital for matters they award to law firms on the proviso that a woman lawyer is receiving origination credit or leading the case. This provides an incentive to law firms to promote women and to ensure that the women lawyers working on their matters are being adequately compensated for their client relationships.
DOWNLOAD THE 2020 EQUITY PROJECT STUDY
Burford's research reveals how GCs are using their “power of the purse” to incentivize change and help close the gender gap in law.