At the beginning of each year, as part of what has become an annual ritual, at least one or two thought leaders lament the lack of diversity and inclusion in the legal profession, and what generally follows are well-intentioned, but superficial, public conversations about how “this year” will be “the year” that we will find the right formula to fix permanently the “D&I issue” and embark upon paths to meaningful progress.  Then, however, we – the many stakeholders of the legal profession – all go about our frenzied professional and personal lives without effecting real, enduring change.  However, this year – 2019 – truly seems different, and the gratitude, in part, must go to Paul, Weiss, Rifkind, Wharton & Garrison LLP for its election of a principally non-diverse class of lawyers back in December 2018 (each of whom undoubtedly earned and merits the honor and title).

And while Paul Weiss merits our gratitude for yet another reminder of the true state of diversity and inclusion in our profession, the real heroes are those who have re-commenced the public conversation about how it is that we will bring about enduring change to the composition of the senior ranks of law firms and other positions of leadership throughout our profession.  Those heroes include the 170 general counsel or chief legal officers who, in January 2019, penned an open letter to law firms and expressed their fundamental disappointment… “that many law firms continue to promote partner classes that in no way reflect the demographic composition of entering associate classes ….” 

Those heroes also include The New York Times and its writers, Noam Scheiber and John Eligon, The American Lawyer and ALM Media, LLC and their Editor-in-Chief of Global Legal Brands, Gina Passarella, and contributing writer, Christine Simmons, and Above the Law and its contributing writer, Joe Patrice, among others, for their thoughtful, continuing coverage and insights.

The collective efforts of all of the above (and more) are absolutely necessary to advocate for diversity and inclusion with our profession and to hold law firms accountable for the lack of diversity and inclusion in their senior ranks.  

Law firms have more than sufficient information and other resources to tackle head-on the lack of diversity and inclusion that persists.  Yet, no efforts will be sufficient to effect the material, enduring change that clients, under-represented lawyers and other stakeholders of the legal profession want to see until law firm “rainmakers” become conduits for diversity and inclusion and cease being obstacles - whether intentional or inadvertent.  

2019:  This Year, This Time Must Be Different

In their one-page letter, the 170 GC’s and CLO’s made clear that they “will direct [their] 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.”  The 170 GC’s and CLO’s are exactly right; however, letters similar to theirs and dating as far back as 2004 – or about 15 years ago – have been sent to firms and shared with the public. Consider the initiative started by then-General Counsel of Sara Lee, Roderick Palmore.  

  • In spring 2004, … Palmore created ‘A Call to Action: Diversity in the Legal Profession,’ a document reaffirming a commitment to diversity in the law profession and taking action to ensure that corporate legal departments and law firms increase the numbers of women and minority attorneys hired and retained. And if law firms don't, the document [stated], "We [the undersigned corporate legal department representatives] further intend to end or limit our relationships with firms whose performance consistently evidences a lack of meaningful interest in being diverse.” 

But, this time, the well-intentioned initiatives that have already gained substantial momentum in the first two months of this year MUST be different than prior initiatives.  

Small-Scale, Face-to-Face Meetings:  Client CEO’s and GC’s, Managing Partners and Rainmakers

Now, GC’s and CLO’s, together with their CEO’s, should come together not only to communicate to law firms, e.g., through public correspondence but should also collaborate in smaller groups of clients that use the same firm and sit down face-to-face with the managing partners and rainmakers of that firm to help them build and implement a detailed long-term diversity and inclusion program with the firm.  That “D&I” program should focus on the professional development of all attorneys from the time those attorneys enter the firm as summer associates and should include strategic objectives, tactical action items and specific, measurable milestones benchmarks to TRACK AND FOSTER the progress of the associates over the course of their careers at the firm until they become partners or they leave the firms to take-on other meaningful positions within or outside of the profession.

 Clients MUST hold the rainmakers accountable for achieving those objectives, action items, milestones and benchmarks; clients MUST hold the rainmakers accountable for the progress realized by the associates (so long, of course, as the associates hold up their end of the bargain).

If clients direct the rainmakers to make diversity and inclusion objectives, action items, milestones and benchmarks as part of the legal services that are being provided in exchange for the material fees paid by clients, those rainmakers, and the firm, will be extremely likely to effect those objectives, action items, milestone and benchmarks; there must be a quid pro quo as between clients, on the one hand, and law firms and rainmakers, on the other hand.All firm lawyers – whether they are rainmakers are not – are highly incentivized to follow the explicit directions of clients.    According to the 2018 Buying Legal Procurement Survey, each corporation within the Fortune 100 spends, on average, $152 million annually with law firms. In aggregate, then, the Fortune 100, collectively, spend approximately $15.2 billion with law firms.  With the magnitude of that legal spend, there are countless ways to incentivize law firms to promote diversity and inclusion AND TO eliminate discrimination and sexual harassment throughout law firm cultures.  COUNTLESS.  So, large corporate clients must deliberately and systematically collaborate, and band together, to make progress.

There is no one formula to designing a diversity and inclusion program.  For example, a firm could easily track each associate cohort (first-years, second-years, third-years, etc.) by measuring and tracking answers to some or all of the following (non-exhaustive) list of questions about each associate (and about each sub-group of associates, with a sub-group defined by specifically identified characteristics) within the associate cohort.

  • By the end of each review year:
  1. Has each transactional associate within the cohort worked on the same volume of transactions (M&A deals, bank or other financings, capital markets placements, pre-packaged bankruptcies, etc.), either by number of transactions, by dollar value of transactions or by complexity of the transaction?
  2. Has each litigation associate within the cohort worked on the same “volume” (either by number of matters or significance of the legal issue in question) of litigation matters?
  3. Has each associate worked on the same number of transactions or litigation matters, and in substantially similar capacities, with a rainmaker?
  4. Has each associate been given the opportunity to work with the top 10 long-term clients of the firm and to gain exposure to the legal management teams at those firms?
  5. Has each associate been given an opportunity to work on or attend a client pitch or been given another business development opportunity?
  6. Has each associate worked on both private and public transactions and/or for both private and publicly-held clients?
  7. Has each associate within a cohort demonstrated the same skill level (e.g., being the principal draftsperson for transaction agreements or memoranda of law with significant legal issues in question)? 
  8. If there are “outliers” who do not yet possess the “average skill set” for the cohort, has the law firm put together a professional development and mentorship plan to help the associate(s) attain at least the “average skill set”?
  9. Has an associate been seconded to a firm client?  If so, is the secondment viewed positively or negatively by the powers-that-be, i.e., the rainmaker, who have the ability to advance the careers of prospective partnership candidates?
  10. Has a disproportionate number of associate attorneys in underrepresented groups been seconded to firm clients?
  11. Have the opportunities (as measured by type, nature and size of transactions or litigation matters) available to associates changed after their return from a maternity or paternity leave?

Law Firm Business Models:  The “Rainmaker” Factor

As part of the engagement with law firms, it is important to recognize that business models of firms are unique and extremely dissimilar from the business models on which large corporations, or firm clients, are grounded.  One difference on which everyone seems to focus is the billable hour, which in the United States, can vary from, by some estimates, from $450 to $2,000 per hour for a firm partner, depending on the partner and his, her or their geographic location.  Yet, one significant characteristic on which few people focus to explain the differences between law firms and their clients is the fact that firms and corporate clients are not governed in the same manner.  Unlike the governance of corporate clients, the governance of law firms is substantially affected by “rainmakers.”  

The definition of a rainmaker is commonly understood within the legal profession and many other professions; within a law firm, a rainmaker is an attorney who (a) generates a substantial number of billable hours, or revenue, for the firm that is materially larger than that generated by most other attorneys within the firm by attracting large, creditworthy, invoice-paying clients, ideally with “blue chip” or “gold standard” names and sophisticated, intellectually-scintillating legal work to add to the cache of the law firm brand, and (b) as a result, possesses a higher degree of prominence in the governance of the law firm, be it through the policy or management committees or through other governance mechanisms present in the underlying partnership-related documents.  

Very few material events within law firms occur without the approval or sign-off of rainmakers.  That is, generally speaking, major expenses are not incurred, compensation practices are not altered, hiring practices are not changed and partners are not made or hired without the sign-off or support of rainmakers.  So, if one wanted to affect any governance or other cultural change or make inroads into diversity and inclusion within law firms, including the diversity of a particular class of lawyers elected to the partnership, then it stands to reason that one has to focus his, her or their energies on ALL of the rainmakers within each firm.

Ideally, one would have access to the income statement of each firm to determine, with certainty, the identity of “rainmakers.”  That said, with publicly available information (including the SEC’s website and legal media websites) and law firm websites, one can develop a well-educated approximation of the group of “rainmakers” at each large law firm.

Taking Paul Weiss as the example at-hand.  It seems unlikely that the new partners were elected without the support of the Paul Weiss “rainmakers” in addition to chairperson of the firm, Brad Karp.  Moreover, it also seems highly unlikely that the professional development programs and protocols for access to mentoring and substantive, career-enhancing legal work that were in place during the formative years of the class of partners just elected existed without the approval of the “rainmakers.”  

Rainmaker Exemplar:  Hypothetical Set of Rainmakers at Paul Weiss

Based on publicly available information as well as pages on the Paul Weiss website, some of the Paul Weiss rainmakers could include, as an illustrative, hypothetical example:

Scott Barshay
Neil Goldman
Marco Masotti
Catherine Nyarady
Taurie Zeitzer

These great, talented attorneys could be, or are, rainmakers undoubtedly, because they have provided, and continue to provide, exceptional legal services and advice to their clients; they have likely built great relationships with their clients; and they have taken direction from the lead attorneys at their clients to ensure the clients’ needs continue to be met.  Take, for a more specific example, Scott Barshay.  One online publication called Barshay a “superstar lawyer,” and the publication went onto say:

  • “The acclaimed corporate lawyer had advised on roughly $300 billion worth of transactions in 2015, most notably Anheuser-Busch InBev’s $103 billion takeover of rival brewer SABMiller. In the process he generated about $100 million in fees for his law firm, Cravath, Swaine & Moore, which ranks among the most prestigious in America.
  • “Just four months later, he quit. Frustrated with Cravath’s age-old system of paying its partners according to longevity and seniority versus sheer output, Barshay left the only firm he had ever worked at to move to a New York rival. Paul, Weiss, Rifkind, Wharton & Garrison agreed to pay him more than $10 million a year, a package worthy of his thick book of business — which includes blue-chip names such as Qualcomm and Kraft Heinz — in the hopes he could turbocharge its dealmaking practice.”  

So, then, in helping Paul Weiss understand the importance of building a culture of diversity and inclusion, the clients of Paul Weiss rainmakers, as a group, should sit down, face-to-face, with those rainmakers to develop a long-term diversity and inclusion program for Paul Weiss, and there is no doubt that Barshay should be at the “sit down.”  And as noted above, there should be elements in that D&I program that allow the various major clients to hold Paul Weiss and its rainmakers accountable for the development of all attorneys (regardless of race, ethnicity, gender, sexuality, creed or other personal demographic).

Focusing further on the “rainmaker” exemplar above, some of the larger clients of Paul Weiss and their respective business leaders and GC’s / CLO’s are included in the table below.  All of the information was pulled from Paul Weiss websites and other websites available in the public domain.

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Imagine, for a moment, putting together in one room all of the entrepreneurial spirit, leadership skills and value-generation capacity of the business leaders in the “Client Founder / CEO / Leader” column (column no. 3) and the analytical firepower, problem-solving prowess of those chief lawyers in the “Client GC or CLO” column (column no. 4) with the Paul Weiss managing partner, Brad Karp, and the set of "possible rainmakers" listed above.  One might hear Jamie Dimon say to the group something like he said to a New York Times reporter in September 2018, “So the diversity argument is very simple. It is the right thing to do, plain and simple.”  And while Jamie Dimon may still be trying to solve fully for the “diversity and inclusion” question within his own organization, everyone on Wall Street - everyone in the global corporate landscape - knows that Dimon is a constructive, creative problem solver, par excellence.

What about deal titans, Henry Kravis and George Roberts of KKR?  Kravis and Roberts, along with other business leaders on the above list, support the CEO Action for Diversity & Inclusion,™ which “aims to rally the business community to advance diversity and inclusion within the workplace by working collectively across organizations and sectors.” 

In fact, they and other business leaders signed a “Pledge,” which can be found at https://www.ceoaction.com/pledge/ceo-pledge/, in further of the CEO Action.  In Paragraph 3 of the Pledge, in particularly relevant part, the CEO-signatories, including Dimon, Kravis and Roberts, pledge:

“We will share best—and unsuccessful—practices: Each of our companies has established programs and initiatives around diversity and inclusion. Yet, we know that many companies are still developing their strategies. We will commit to helping other companies evolve and enhance their current diversity strategies and encourage them, in turn, to share their successes and challenges with others.”

I would ask - implore - those CEOs who have expressly pledged, as is clearly evident from the CEO Action for Diversity & Inclusion website, to take the initiative here and commit to help others, particularly law firms, as you expressly committed to do.  It seems to me that if you sign a pledge and manifest your express commitment to adhere to that pledge, you ought to live up to that pledge and demonstrate how you have done so. I would be more than happy to assist you all in any way that I can.

Rainmakers are key to enduring change, and they must be part of any client-firm discussion.  Rainmakers must become conduits to change, rather than obstacles.  And while rainmakers may not be obstacles in the sense of thwarting diversity and inclusion initiatives, their silence and inattentiveness to diversity and inclusion programming serve as formidable obstacles to progress.    

If inclusion and diversity are as important to these well-heeled, influential corporate clients as some of their own public pronouncements and “pledges” suggest, it is not a far stretch to believe that these clients can, and should, help to effect the diversity and inclusion strategies, practices and programming at law firms throughout the world, including Paul Weiss, through engaging directly with managing partners and firm rainmakers and helping those attorneys shape enduring change within their firms.  

Selected References

2 thoughts on “Key to Advocating for Diversity and Inclusion Within Big Law: Understanding Law Firm Business Models — Why Rainmakers Must Become Conduits for Inclusion”

  1. This is an incredibly thoughtful and comprehensive analysis of how law firm leadership can catalyze real change concerning partnership diversity at their respective firms. It insights are really terrific and super helpful.

    The article takes a panoramic/360 view of the problems concerning law firm partnership diversity. In particular, it breaks down the law firm ecosystem that anchors this difficult issue. Firm rainmakers and the client companies that hire them are at the center and therefore, must be the stakeholders who drive home meaningful solutions.

    Assessing the partnership diversity issue from this aligned perspective is immensely valuable. It becomes important to an understanding of why it will be hard to remedy without complete buy in from the firm’s top revenue drivers, aka rainmakers and their clients. The article wisely points out that CEOs of the companies that retain major law firms can leverage their considerable influence to address the partnership diversity issue.

    Some companies like Facebook have been requiring diversity among legal teamsthat they retain. But most clients, especially the super powerful ones, have not been engaged fully enough on the issue. Once clients, and rainmakers start to drive the diversity issue, the article opines that real change will take place. And that is absolutely true.

    The article’s highlight, however, is the list of key performance indicators that are set forth for associate outcomes. These KPIs can help partners and associates forecast partnership attainment/potential by better benchmarking variables such as work flow, client exposure, quality of work during the annual review.

    Accountability and standardized transparency are crucial to solving the partnership diversity conundrum. The value of firm specific metrics for tracking and structuring partnership potential among associates cannot be overstated. In closing, this article is an excellent tool and mini-playbook for firm leaders seeking to innovate and re-calibrate current practices in order to achieve more partnership diversity. Well done!

    1. Thank you so much, Valerie, for your extremely thoughtful response! I look forward to working with you in parallel to help build an inclusive environment in our profession. We will make a difference, and we will build an inclusive environment – one initiative at a time and day by day. Notwithstanding my enthusiasm and my optimism, I know we have to find a way to bring major clients and rainmakers along on the journey. If there are any initiatives or ideas that I can help advance toward fulfilling this objective, please let me know; I stand ready to help in any way that I can.

      All the best,
      Karen

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