April 20, 2011
By  Maria Kantzavelos
Law Bulletin staff writer

While a business case for diversity does exist for law firms and their corporate clients, it falls short of providing an environment for achieving meaningful economic and social results for significant numbers of diverse lawyers, according to a study by the Chicago-based Institute for Inclusion in the Legal Profession.

The findings of the study of corporations, law firms and diverse partners in law firms suggest that there is still a long way to go to make the legal profession inclusive through the full integration of diverse lawyers and law firms into the corporate legal marketplace, the institute said.

IILP Chairman Marc S. Firestone, who is executive vice president, corporate and legal affairs, and general counsel for Kraft Foods Inc., said in a prepared statement that the legal profession has sought solutions and increasingly focused on diversity and inclusion, acknowledging that the profession has made "much progress" in this area.

"Equally important, however, is the fact that we must acknowledge that there is a measurable level of frustration, and even skepticism, about the pace undefined and the possibility undefined of significant change in key areas of measurement," Firestone said in the statement. "Our findings show that diverse lawyers are disappointed with progress and law firms are finding that their diversity efforts are not a clear priority when dealing with corporate clients."

The study, which was conducted from August to December last year, set out to examine how the business case for diversity undefined the notion that clients value diversity and therefore are finding ways to include that value in determinations of the qualifications of lawyers to handle their work undefined has impacted three primary stakeholders: corporate clients, law firms and diverse partners.

"It's proven so important in terms of efforts to promote diversity in the profession and yet all the major stakeholders, when you speak with them by themselves, express tremendous frustration with it," said Sandra S. Yamate, the institute's CEO. "We did this study to try to find out why that is. Why is it not meeting peoples' expectations and needs?"

The legal profession has been hearing about the so-called business case for diversity undefined where corporate clients are said to apply the "carrot" of continued or increased business and the "stick" of an implied decrease, withdrawal or loss of business to encourage law firms to become more diverse undefined for more than 20 years, Yamate said.

"Initially, when we first started talking about it, it was the notion that as businesses had more diverse consumers, customers, clientele, that they would be better able to serve those markets by having greater internal diversity," she said. "Over the years, though, within the legal profession it evolved into a sense that corporate clients who were emphasizing greater diversity in, let's say, their business practices, wanted to see greater diversity in their legal service providers."

But the study found that few corporate law departments use any kind of incentive, such as promotions, raises or bonuses, to encourage in-house counsel to retain diverse outside counsel. That finding was striking to Wildman, Harrold, Allen & Dixon LLP partner Sarah L. Olson, who serves as the firm's professional development and diversity director.

"In law firms, I think there is some financial motivation for developing diverse teams. Our compensation has always had a component related to diversity efforts," Olson said. "You would think that would be something businesses would consider.

"For diversity to grow, there needs to be more than an inspirational message."

The respondents of the study, which involved a three-pronged, online survey of the attitudes and practices of general counsels, law firm management and partners at law firms, included: 52 corporations representing 10.4 percent of Fortune 500 corporations; 391 law firms representing 65.8 percent of law firms with more than 500 lawyers and 39.8 percent of law firms with 251 to 500 lawyers on the National Law Journal's list of 250 largest U.S. firms; and 1,032 diverse partners.

They were asked questions about how corporations choose to allocate their budget for diverse outside counsel; how law firm management determines whether there is any correlation between a firm's diversity efforts and business generation; and about the actual revenue amounts generated from corporate clients by law firm partners who are women, racial or ethnic minorities, lesbians, gays, bisexuals or transsexuals or partners who are disabled.

Although many corporate general counsel and in-house counsel have indicated that their corporations have sought to change their relationships with law firms based on poor performance against their company's diversity metrics or objectives, only 12.5 percent of the survey respondents indicated that they had actually done so, while 89.6 percent reported that they had not, according to the findings of the study.

Of those corporations that did change their relationships with law firms based upon poor diversity performance, 83.3 percent said they reduced the use of the firms as outside counsel, while none pulled any matters from a firm, and only 16.6 percent terminated the relationship with the firm, the study found.

Those findings reflect "a good start," said Hinshaw & Culbertson LLP partner Leslie Richards-Yellen , who serves as the firm's chief diversity and inclusion officer.

"If corporations tied diversity metrics more to allocation of work, I think you'd see a significant change in the way law firms try to nurture diverse talents," Richards-Yellen said. "Law firms are very savvy economic animals. If you incentivize behavior, they will react."

Another finding suggests that although some diverse partners are, indeed, benefiting from this business case for diversity undefined seeing business coming from corporate clients who have expressed a commitment to greater diversity undefined a great many more are not, Yamate said.

The study also found that:

• 72.7 percent of law firms surveyed receive zero to 5 percent of their gross revenues from clients who ask about the firms' diversity;
• 80 percent of law firm respondents said they have never been told that they had received business, in whole or in part, because of the diversity of the lawyers in the firm or the firm's diversity efforts; and
• 84.1 percent of diverse partners surveyed have served on their law firm's diversity committee, but only 8.1 percent have ever served on their firm's executive committee.

The report also provides recommendations for both corporations and law firms to help make the business case for diversity more effective.