Last summer, I wrote two pieces about the lack of gender equality in the profession generally and big law in particular. These were based on an ABA Survey, which summarized several recent trends of the profession in such areas as diversity, women, legal education, technology, and more. It was not a pretty picture. (My first piece summarized the findings, the second responded to some criticisms of my interpretations of the Survey’s findings).
A recent Survey by Burford Capital conducted by Ari Kaplan Advisors, confirms the startling gap between men and women law firm compensation, especially at the partner level. This gap translates pretty directly into a lack of power of women within the law firm. And a lack of power translates into an inability to change the conditions that cause it.
Here are some important statistics cited by Burford in the preface to its Survey:
*93% of law firms say their most highly compensated partner is male. [i]
*Most firms have no women among the top 10 most highly compensated partners.[ii]
*Male partner out-earn female partners by 53%, 80% of female partners report lower average compensation.[iii]
*80% of equity partners in large law firms are male.[iv]
Why, after all these years, where so many associates going to work for law firms for so many years, do we still see such disparity at the partner level?
So why is this? Why, after all these years, where so many associates going to work for law firms for so many years, do we still see such disparity at the partner level?
Compensation in law firms depends heavily on the origination of business. Most big firms track origination credits scrupulously, as they should. Law firms make money by individual lawyers bringing in business and clients. So, the more business a lawyer brings in, the more valuable he or she is. This translates pretty directly to compensation. In most firms, those with the biggest origination credits get paid the most. And in most law firms, those who get paid the most have the most power. They are most often found on the Management Committees that make the rules.
And while origination may seem straightforward, it’s often not. The award of origination credits is often based on a Byzantine set of firm rules that favors tradition and those with big books of business. Many firms, for example, award origination credit for the life of the originator. So no matter what happens, the person first getting the credit keeps it. Irrespective of whether the originator keeps working on the matter or even has any responsibility for it. And in some firms the award of origination credit includes credit for any future matters coming from the client regardless of the circumstances or who brings it in.
Why are origination credits so important to a lawyer? You get credit for fees paid not only for the work you actually do, but also for some percentage of the work done by others one the file or for the client. If the fees are substantial-say north of $1 million, this can amount to a very large credit.
It is a system that favors the status quo and those with big origination credits which is by and large white males. And who makes the rules: the people on the Management Committees. The same people who, by the way, often have the largest origination credits and a vested interest in the status quo.
Granted, many firms have subjective systems where a compensation Committee decides compensation. This Committee could conceivably look behind the numbers and compensate others. But the attorney-client relationship is an intimate one. Most comp committees will not nose around into the relationship a partner has with a client. It would be unseemly and intrusive to the client and the partner. Having little other bases to go on, they fall back on the origination credit as the most important factor. And, of course, many members of the comp committees are those with large origination credits.
But you might say: women have the same opportunity to get business as men, right? Wrong. The Burford Study cites studies that report 67% of women have experienced a lack of access to business development opportunities because of gender.[v] Other studies cited by Burford show that most women report they are perceived as being less committed than men and that domestic and caregiving commitments create bias against them.
So things remain the same: depriving women and minorities of the ability to grab the brass ring. Depriving women and minorities with a chance to change the rules. Placing ceilings on their ability to reach the higher compensation levels afforded men, limiting women’s’ options.
But there is a solution. If law firm clients genuinely have an interest in diversity and gender equality among their lawyers, they could demand change. They could demand that origination be awarded differently. They could demand that women and diverse candidates share. This change could shift the balance of power and get better representation for the client.
52% of GCs and senior in-house lawyers are entirely unaware of how origination credits are awarded within their law firms. Another 26% say they are sometimes aware; only 17% always take the time to be informed
But are they doing it? According to Burford Survey, 52% of GCs and senior in-house lawyers are entirely unaware of how origination credits are awarded within their law firms. Another 26% say they are sometimes aware; only 17% always take the time to be informed. Only 36% of in-house counsel think law firms need to improve how they handle origination credits to enhance gender equality. That’s not terribly surprising. 80% of those surveyed don’t even have a formal policy that their law firms meet any gender-based diversity requirements.
But in-house clients will tell you getting involved in origination credits isn’t easy. Firms are very reluctant to have a client nose into their business. They argue with some justification they should be free to run their business as they want based on their own goals and objectives. (Most big firms will proudly proclaim their commitment to diversity, by the way).
And if the account is not large enough, a law firm might just terminate the representation altogether if a client gets too nosy. Finally, there is the common problem that firms could say one thing and always do another. This problem could place a woman and diverse lawyer in a ticklish spot. What if the client asks the lawyer if they are getting credit? Do they tell the client they are not getting the credit and jeopardize their career with the firm for blabbing secrets? Most clients really don’t want to get involved in these kinds of issues.
Law firms are vendors. Businesses place requirements on their vendors all the time. It’s up to the clients to step to the plate if we want to see equality.
Most businesses profess a commitment to diversity. But if they are being genuine, that commitment by itself has not achieved parity. It probably won’t unless the economic balance of power shifts. Clients control the business. They own the business. They can and do make demands about how their business should be staffed. How it should be managed. They can also make demands about how the lawyers working on that business should be rewarded through origination credits. Law firms are vendors. Businesses place requirements on their vendors all the time. It’s up to the clients to step to the plate if we want to see equality.
Clients should care about origination awards for a practical reason as well. If a good lawyer is handling matters competently and isn’t correctly rewarded, that lawyer’s desire and interest to work with the client may very well wane over time. Good lawyers have opportunities; a client has a vested interest in making sure the opportunity of doing the client’s work is a good one.
Clients hold the power of the purse. If they want diversity, they can demand change. Will they? How committed are we as a profession to gender equality?
[i] Destiny Peery, 2019 NAWL Annual Survey on the promotion and retention of women in law firms, National Association of Women Lawyers (May2019)
[iii] Jeffery A. Lowe, 2018 partner compensation survey, Major Lindsey & Africa (December 6, 2018)
[v] Roberta Lienbenberg and Stephanie Schaaf, Walking out the Door, The Facts, Figures and Future of Experienced Lawyers in Private Practice, ALM Intelligence and the American Bar Association (November 27, 2019)