Annual Meeting

What are the business costs of ignoring racial and gender diversity?

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The benefits of having a diverse workplace are well-established. In fact, a lack of diversity can even have a negative effect on the bottom line. So why haven’t law firms taken account of the business benefits of diversity?

That was the question a group of minority and female attorneys and business professionals examined during a Saturday session at the ABA Annual Meeting in Chicago. The panel discussion, moderated by professor Joan Bullock of Florida A&M University College of Law, consisted of Emery Harlan, a partner at Gonzalez Saggio & Harlan; John Mitchell, an executive coach at KM Advisors; Wendy Shiba, a retired general counsel; and Joseph West, president and CEO of the Minority Corporate Counsel Association.

The legal industry remains one of the least diverse out of the professional service fields, a fact that Bullock hammered home at the start of the session. Bullock stated that, in a recent Law360 survey (sub. req.) of 289 major law firms, white lawyers make up 86 percent of all attorneys while less than 3 percent of attorneys in the U.S. are black (not even 1 percent of law firm partners are black). As for women, Bullock cited another study that found they made up less than a quarter of the partnership ranks. “How far have we come?” Bullock asked. “The stats indicate we have not come very far.”

In that vein, several panelists believed it was up to corporate America to force the legal industry to become more diverse. “I think corporations are leading the charge and I believe we are at, or approaching, a tipping point to where change is about to start happening,” said West, former general counsel of Wal-Mart. He pointed to his former employer, as well as other companies such as Microsoft that require diversity among outside counsel and have programs in place to track diversity efforts at law firms. West even noted that Microsoft would punish its outside counsel if they failed to hit certain benchmarks or metrics when it came to having a diverse workforce. He also pointed out that, a decade ago, only three companies in the Fortune 500 had chief diversity officers. Now, he said, two-thirds of those companies have them.

Shiba, however, did not share West’s optimism. “I was at three public companies, and I was always the only woman and the only minority in the C-suite,” Shiba—an Asian-American—said. She said that change needs to come from within the institution as an “embraced value” and not just because the bill-paying client is demanding it. “The business case for diversity is premised on the well-accepted viewpoint that diverse teams do better,” she said. “They produce better results and take more creative approaches.”

Harlan’s law firm had conducted a survey that found that diversity was best for business. Of the 200 law firms taking part in the study, highly diverse law firms were found to generate far more in profits-per-partner than their less-diverse counterparts. The study found that less-diverse firms suffer reputational damage and have higher employee turnover, both of which can be costly. In that vein, Harlan encouraged consumers, advocacy groups and even large pension funds to put pressure on corporations and law firms to be more diverse. “Once companies have to reveal how poorly they are doing [in promoting diversity], that will empower some of the folks in the positions within the corporation who really want to make a change to be able to do so,” said Harlan. “In addition to it being the right thing to do, they’ll be embarrassed and their numbers will be scrutinized by the general public and by the stockholders.”

Mitchell, meanwhile, said that he thought the idea of a business case for diversity was a flawed premise. Instead, he made the case that minorities and female attorneys should try to learn more about business in general. “The percentage of lawyers who understand the businesses they are part of is about the same as the number of thumbs I have,” said Mitchell. “It will help you a ton and help you change this profession.”

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