How does origination credit impact diversity in the business of law?

One significant factor contributing to the lack of gender and racial diversity in the legal profession is how origination credit is awarded. According to a WSJ article, female and racially diverse lawyers historically often receive far less than their fair share of origination credit. This was confirmed by research commissioned by Burford to understand whether and how GCs are using their “power of the purse” to promote female lawyers to leadership positions, incentivize change and close the gender and racial gap in law.

The study found that 52% of GCs and senior in-house lawyers interviewed were entirely unaware of how origination credit was awarded by the firms they hired. This is a problematic knowledge gap given that origination is critical to success, career advancement and higher levels of remuneration at Big Law firms.  

Origination credit and diversity at law firms

Why are women and racially diverse lawyers disadvantaged when it comes to origination credit? The answer may be a combination of history and unconscious bias. Lawyers from historically advantaged groups have traditionally inherited more client relationships than their counterparts. Senior partners may in turn be inclined to mentor other lawyers that look and sound like them. The problem is exacerbated by the fact that some law firms award origination credit in perpetuity. As a result, lawyers who benefited from mentorship and inherited clients stand to receive credit years later for new matters they may not even be involved in. 

In fact, in a report co-authored by attorney Roberta Liebenberg, Burford’s Equity Project Champion, 67% of senior women report that they have experienced a lack of access to business development opportunities due to gender. This demonstrates how origination credit contributes significantly to the gender and racial gap in law, by preventing female and racially diverse lawyers from receiving fair compensation and advancing in their careers.

How can GCs increase diversity in their panel law firms?

By recognizing their purchasing power

More in-house legal departments are recognizing their power of the purse and holding external counsel accountable for the diversity of their teams. In January 2019, 170 GCs penned a letter to the law firms that represent them in which they said, effectively, do more to close the law’s gender and racial gap or risk losing our business. Microsoft prominently lists its expectations for outside counsel on its legal department website and notes that the percentage of diverse attorneys working on its behalf increased from 33% to 48.2% in six years.

Implementing formal policies to promote diversity

While corporations are very publicly holding firms accountable for their gender and racial diversity, Burford’s 2020 Equity Project Study found that most companies do not have formal policies mandating that the law firms they hire must meet diversity requirements. In fact, 80% say their companies lack such policies. Instead, many say they apply informal assessments to guide diversity efforts, or they prioritize the diversity of their own internal legal team over those of law firms whose staffing decisions they see as outside their control.

Asking about origination credit

Even in the absence of a formal program, asking about origination credit is a simple step that in-house lawyers can take that will help begin to bring about change. Simply asking about origination credit will demonstrate to the law firms they hire that clients are interested in and paying attention to issues of equity as it relates to their business. As the Assistant GC of a Fortune 100 energy company put it, “You have to follow the money. Lawyers cannot succeed in a law firm unless they receive origination credit. If you are not asking this question as a client, you are not helping.”

Why then don’t in-house lawyers inquire about origination credit? As the Managing Counsel of an oil and gas company put it, “We usually do not know because laundry like that is not done in front of the clients. I do ask about it and can usually tell from their non-answers that firms prefer not to disclose that information.”

Using tools like The Equity Project

The Equity Project is an award-winning initiative that promotes conversations with companies and firms about representation and origination credit to augment and advance existing corporate diversity and ESG goals by incentivizing firms to ensure that clients are represented by women and racially diverse litigators. Since launching the Equity Project in 2018, Burford has committed over $100 million to finance commercial litigation and arbitration led by women and racially diverse attorneys. To learn more about it works download the Equity Project 101.

Conclusion

While the gender and racial gap in law will not go away until both the buy-side and sell-side of the legal market work collaboratively to close it, in-house counsel can take a step in the right direction by inquiring about origination credit and choosing the firms they work with accordingly.

We welcome inquiries about Equity Project financing and other ways Burford can help companies and law firms. For more information, please contact us.