Diversity Quotas & Signal-to-Noise Ratios

Saturday, May 14, 2005

The New York Law Journal is reporting that,
under the auspices of the New York County Lawyers Association, "more
than 60" law firms have agreed to a written pact to report to
their corporate clients the makeup of legal teams by "race, gender,
ethnicity, and sexual preference," and that companies such as
Coca-Cola, the Bank of New York, Merrill-Lynch, and Prudential, have
signed up on the other side.

Thanks to the UK’s The Lawyer, we
also
know the
firms include Arnold & Porter, Bingham McCutcheon, Cadwalader Wickersham & Taft,
Cleary Gottlieb Steen & Hamilton, Dewey Ballantine, Debevoise & Plimpton,
Mayer Brown Rowe & Maw, Shearman & Sterling, Sidley Austin
Brown & Wood, Weil Gotshal & Manges and White & Case.  (Volokh
Conspiracy commenters have been all
over the story
.)

Now let’s just stipulate for purposes of discussion that encouraging
"diversity" is a virtuous and laudable thing, and that this
pact brims over with the best of intentions toward advancing that goal.  Also,
not being an employment lawyer by training, I’m the wrong person to
ask whether it constitutes some form of impermissible employment discrimination,
and the Volokh commenters have scarcely reached a consensus either. 

For
example, would I, a straight Protestant white guy, have an actionable
beef if I were repeatedly asked off juicy assignments in order to make
the firm’s numbers?  What if that pattern ultimately cost me a
shot at partnership?  And presumably, firms are now going to need
to poll all their partners and associates:  What
if a gay lawyer had a powerful—and,
in many circumstances, fully understandable—preference
for staying in the closet?  What’s his obligation to tell his
employer the truth?  (He probably signed something agreeing to
do so as a condition of employment, and the clients have now told the
firm in no uncertain terms that his sexual preference is materially
germane to the firm’s business.)  Do you get triple credit for
an Hispanic lesbian?
  Can clients object to Arab or Muslim lawyers?  If the client
makes sensitive anti-terrorism homeland-defense equipment?  But
enough of these hypotheticals.  

The
topic du jour here at "Adam Smith, Esq." is, what economic impact
will it have?

In the short run, one should expect it to raise the desirability and
market value of minority and gay associates—the supply of which
for all practical purposes is fixed for the next 5 to 7 years, but
the demand for which seems to have just gotten a shot in the arm.  The
problem is that BigLaw associates are paid, if not in absolute lockstep,
close to it (even bonuses, at most firms, are tied to quantitative
billable-hour quotas).  So it’s not immediately obvious how BigLaw
Firm X could "outbid" a competitor for a 3L fitting into one of the
protected classes. 

On the other hand, there are non-monetary
aspects to compensation which rival or even outweigh the paycheck itself—desirability
of assignments, "lifestyle" considerations, quality of mentoring, opportunities
for professional development, exposure to key clients, etc.; this is
clearly the playing field on which the bidding war will have to play
itself out.  (Again, we’re agnostic on the question of whether
this is fair to the straight white guys, we’re just trying to forecast
how firms might rationally behave given this new set of client incentives.)

Will the supply/demand balance change in the longer run?  I have
my doubts.  The marginal increment to the overall "package" BigLaw
will be offering the minorities and gays is both too small in magnitude
and too far in the future, from the perspective of a college graduate
contemplating law school or another career.  Its then-present
discounted value is probably close to zero, and barely amounts to "noise"
when contrasted with the extremely strong "signals" (both pro and con)
generated by the prospect of practicing law for 40 years. 

More
specifically, the differential attractiveness of specific practice
areas (tax, say, or M&A) will be a far more important determinant of
the hypothetical minority-3L’s precise career choice than any inchoate
BigClient mandate, so I foresee no radical reworking of the distribution
of minority/gay lawyers.

The truly interesting question is whether the actual
quality of legal service delivered to clients by will suffer, improve,
or not change.  The quick, if not glib, answer is that introducing any
non-meritocratic criterion will harm service quality.  But again,
I think the quality controls in place at any name-brand BigLaw firm
will filter out any hypothetical deterioration in work product.  Remember,
we’re talking about effects at the margin of the margin:  We
can essentially stipulate that any first-year associate actually hired
by BigLaw was at the very top of their college class, scored at the
top of the LSAT’s, and graduated, if not at the top, then solidly
enough, from a name-brand law school.  None of these people are
technically incompetent—putting it more realistically, all are equally technically
incompetent as first-year’s, and BigLaw has found ways of working
with that unformed clay heretofore. 

Is it possible, on the other hand, that the Politically Correct Police
are right, and that since (as they would have it) diversity is a per
se
good,
the quality of services will improve as more duelling viewpoints will
be brought to bear, honing the blade of advocacy in the fire of conflicting
opinions?  (Sorry, I have to confess that sometimes the self-congratulatory
rhetoric of the PCP gets to me.) 

Again, for the reasons above,
not likely.  Sure, a company might want a woman on its sexual-harassment
defense trial team, or a gay on a sexual-preference defense team, but
that was true years and years before this pact was announced, as a
matter of elemental strategy.  For the arcane cross-border tax
question, the complex structured-finance transaction, or the mind-numbing
mega-merger due diligence, will the PC ratio of the team matter?   Hard
to see how.

So an economic non-event?  Yes; except in the narrowest of sand-in-the-gears
senses, that it’s yet another thing unrelated to their core business
that BigLaw has to keep track of and report on.  Sounds like something
the firms’ CIO’s, not their CEO’s, should focus on.

Related Articles

One Comment


  1. David, 8 years ago Reply

    There is, to my mind, a real possibility that this makes things worse for associates. Minority candidates may feel put down because despite their talents & achievements (think about what it takes to make biglaw), they are still seen as just a point for diversity efforts. Non-minority candidates are now a point against their firm, and this has got to hurt.


Leave a Reply

Bear