Racial, Capitalists & Associates (September 2018)

Shuffling Towards Diversity in the World of Top Law Firms

A quick glance at the organizational chart of any elite law firm makes it clear that the industry’s seemingly endless profitability is built squarely on the toil of its junior associates. Still, like any other employees, lawyers have agreed to what’s basically an exchange of capital: in return for their blood, sweat and billable hours, associates get an ostensibly prestigious job title, an outside shot at a lucrative partnership slot and a hefty direct deposit every other week. Whether that’s actually a fair trade is a separate question, but it’s at least widely perceived to be a beneficial arrangement for young attorneys — otherwise the opportunity to make that swap wouldn’t continue to be the object of morbid fascination and cutthroat competition among rising law school graduates. For a notoriously risk-averse group, the gig sells itself: elite firm associateship is a one-way ticket to money, power and respect.

Yet, somewhere along the way, minority lawyers have taken a detour. There’s been a steady expansion in the ranks of minority attorneys in recent years; the percentage of people who passed the California bar exam last summer that identify as black, Hispanic, Asian or some other minority, for instance, was about 38%, up from just under 31% a decade ago. Meanwhile, according to The American Lawyer’s annual diversity survey, over the same period the proportion of minorities at top firms — the ones who just got paid — has increased much more modestly, from 13.4% to 15.6%.

Truthfully, there could be any number of reasons why minority bar admission has grown more than 40% faster than BigLaw employment. For one, as the firms would surely hasten to point out, passing the bar is a necessary but not sufficient condition for employment. Plus, employee composition is a lagging indicator; it’s not as if there’s an annual purge that kicks all the existing lawyers to the curb and replaces them with rookies. And then of course there’s the omnipresent culture of cronyism and array of selective attrition pressures that conspire to put minorities associates behind the 8-ball.

But the discrepancy is also baked in to the fundamental employer-employee transaction. The firm is, most obviously, buying the employee’s time and expertise. Beyond that though, employees can add value to the firm in a variety of ways beyond the direct output of their labor. Lawyers, especially, are often tasked with shoring up the firm’s social standing, wooing clients and recruiting the next generation of attorney-cogs needed to keep the machine billing in perpetuity.

Quite often, cashing in on that bonus value means monetizing the employee’s racial identity. This is standard operating procedure at law firms. The common practice of showcasing minorities in visible positions, for instance, is meant to signal firms’ cultural sensitivity and general lack of bigotry; it’s like they’re bragging about how many black friends they have. But the underlying theory is more economic than ethical: the idea is that a diverse workplace will eventually fatten the bottom line by pulling in clients and talented employees who themselves prize a plural environment. Wal-Mart famously validated this thinking back in the early-aughts when it insisted that all of its legal representation “demonstrate a meaningful interest in the importance of diversity”, or risk losing the retailer as a client. The presence of minorities on the payroll was literally quoted as the price of retaining a lucrative account. Law firms got the message and came to understand minority lawyers as a renewable resource that could be endlessly mined to generate acceptable diversity statistics. The good news is that that mindset incentivizes firms to hire minority lawyers — but not without muddying the basic exchange of capital, since, in addition to bodily fluids and billable hours, firms are invariably also purchasing whatever monetary value can be squeezed out of the associate’s skin color.

That brazen commodification of identity is a textbook case of a (mostly white) profit-seeking entity getting rich off of someone else’s racial status, a practice that the professor Nancy Leong calls “racial capitalism”. The legal industry didn’t invent this brand of appropriation — it’s truly a tale as old as time — but nowadays it’s as guilty as anyone else. As far as the firms are concerned, the value proposition behind racial capitalism is self-evident; to them, it’s a simple matter of buying an asset on the open market and then re-selling it at a markup. Part of being a racial capitalist, it turns out, is being a regular capitalist. The employees’ motivations, on the other hand, are a little murkier: depending on who you ask, they’re either gamely leveraging their personal comparative advantages to the extent that the market permits, or gritting their teeth while the man screws them out of their supposedly inalienable human identity. Mileage may vary.

Either way, racial capitalism is abetted by the highly contextual cost of identity. Firms may be able to buy improved diversity numbers in the marketplace, but the value of that purchase is remarkably elastic; a practice that has a Wal-Mart-like client hell-bent on increasing diversity would no doubt gauge an applicant’s race differently than one with less activist clientele. Alternatively, the price a firm is willing to pay for an identity can easily fluctuate on the basis of how many underrepresented attorneys are looking for work or the prevailing social attitudes in the area, or even the number of minority lawyers that the firm already employs.

That last point is crucial. Diversity at law firms (and everywhere else) exists on a sort of continuum that at one end has practices that are 100% white, and, at the other, ones populated entirely by minorities. Firms at either extreme fall well short of prototypical diversity; a group made up of all black lawyers is just as segregated as its all-white counterpart. But somewhere in the middle — and reasonable people will disagree as to exactly where — sits the “ideal” mix, which presumably is the employee profile that firm diversity efforts are so busy chasing.

A firm’s positioning on that scale says a lot about what might happen if and when it adds more underrepresented employees. For a firm that’s nearly entirely white, hiring a black lawyer will increase its diversity and push it a little closer to the sought-after ratio. But for one that’s 95% black, adding that same black lawyer will only make it less diverse and position it even further from a representative mix. All else being equal, a white firm’s diversity is buoyed by hiring a minority, while a black firm’s gets sunk. The implication is that the more minorities you already have on staff, the less value you get from adding one more. Minority employees, in effect, exhibit what economists call diminishing marginal utility.

That’s not great news for minorities trying to find their way into elite law firms. As capitalists — racial or otherwise — firms might be willing to purchase greater diversity at a price consistent with how much value it brings them, but spending even a penny more is antithetical to their get money ethos. And while diversity efforts may (or may not) start with the best of intentions, somewhere on the road from lily-white country club to multicultural mosaic, the next marginal unit of diversity will begin to cost more than it makes. At that point, it’d take Atticus Finch to persuade firms to look past their narrow self-interest and fund diversity efforts out of the goodness of their hearts.

What’s less clear, though, is exactly where big firm and minority applicant interests begin to diverge. On one level it’s simple: employers and potential employees start out in lockstep (since initially both stand to benefit from a minority hire) and don’t cross the Rubicon until further diversity stops paying for itself. But in practice, the calculus is constantly shifting. The trouble is that since every single identity valuation is shaded by the firm’s normative preferences and the various pressures pushing it towards or away from a more balanced racial mix, it’s tough to pin down precisely when firms might — correctly or not — decide that the effort isn’t worth the trouble.

All of which leaves open the possibility that we’ve actually already reached that point. Practices monetize diversity by showcasing minorities in highly visible roles, like heading up the hiring committee or posing on the cover of the firm brochure. Fifteen percent representation — which is about where the elite firms have been hovering for the last few years — might well be just enough to comfortably staff those duties. And, coincidence or not, just enough” diversity is precisely what the basic business case behind these efforts calls for. If nothing else, it’s a reasonable hypothesis for the stagnation of minorities’ presence at elite firms; having already cleared the threshold required to credibly present itself as diverse, BigLaw may have quietly decided that one out of six is good enough.


Then again, average values are a bit like artless closing arguments that skip past all the nuance. Something always gets lost in translation. The AmLaw diversity data is no exception. It’s not as if precisely 15.6% of associates at each firm hail from underrepresented groups; truth be told, there’s actually a decent amount of variance in the results. The very best performers on the list employ a bit more than double the average proportion of minorities, while the very worst check in at less than half; a six-fold gap separates top from bottom. It’s not immediately clear why, despite angling for dominance in broadly similar spaces, some firms seem to have cornered the market on minority legal talent, while others have abandoned it altogether. But, for some reason, these highly sophisticated — and presumably rational — profit-seeking enterprises appear to have assigned vastly different worth to diversity in the workplace.

The knee-jerk explanations tend towards ad hominem or deus ex machina: either the firm is willing to cut off its racist nose to spite its bottom line, or circumstances beyond its reach — the availability of minority lawyers in the geographic area, for example — have conspired to undermine otherwise noble intentions. Since almost nothing registers as too farfetched in post-post-racial 2018, and there really are parts of the country that don’t have all that many minorities, these justifications can’t be dismissed out of hand. But, once again, they sidestep the critical details of the exchange between employer and employee.

In her landmark paper on racial capitalism, Professor Leong is careful to distinguish between what she calls “thin” and “thick” conceptions of diversity, and others have described as the extremes of a workplace’s diversity climate. Thin diversity is fixated on the appearance of diversity; hiring quotas, a preoccupation with featuring underrepresented faces in promotional materials and a tendency to showcase minorities are all classic hallmarks of this sort of environment. Leong excoriates thin workplaces as “unabashedly superficial and [preoccupied] with numerical representation”. Thick climates, on the other hand, treat numerical representation as a mere starting point. The idea is that organic cross-racial interaction in the workplace is the only way to get everyone to link arms and sing kumbaya — or, if that’s asking too much, at least to facilitate an inclusive spirit that’s likely to benefit all employees, regardless of skin color. Thin diversity ultimately expects employees to assimilate into institutional norms, while thick seeks the opposite: an organization whose practices and philosophies mold to the needs of its members.

Even though nearly every firm at least pays lip service to the importance of workplace plurality, it’s still striking how differently diversity policies are presented by the firms at the top and bottom of the American Lawyer table. Perennial industry leader White & Case (#1 on AmLaw’s 2018 diversity list, with 34% minority attorneys) screams its accomplishments from rooftops: they’re dying for the world to know that they’re “always working to strike a balance between understanding and respecting our many cultures and developing a single, strong core value system” — they might as well explicitly say “we’re building a climate of thick diversity”. We are diverse, hear us roar. The middle of the pack tends to be a bit more understated. Davis Wright (#100, 15.9%), for example, downplays the racial and ethnic angles by insisting that diversity matters “not only in terms of race, gender, ethnicity and sexual orientation, but also in ideas, perspective, personality, work style, age, and more”; by their own admission there’s still “hard work ahead”. Meanwhile, the bottom feeders seem to be there for a reason. Nexsen Pruet (#220, 5.3%) builds its diversity statement around AmLaw scorecard data from 2013; it’s not clear that that inattention even rises to the level of numerically-driven thin diversity. White shoe law firms are a black box, so cherrypicking details from their online diversity statements is hardly dispositive. But even so, the exercise calls to mind Anthony Bourdain’s famous caution against eating at restaurants with filthy bathrooms: the website is the part of their business that the firms let you see. Just imagine what happens behind closed doors.

Diversity climate is an expression of a firm’s subjective valuation of a plural workplace, but it also hints at diversity’s objective monetary worth. About a decade ago, the professors Jorge Gonzalez and Angelo Denisi wrote a paper trying to suss out how diversity climate impacts business performance. The results read like a sales pitch for thick diversity. It turns out that the effect of what the professors termed “race/ethnic heterogeneity” depended largely on its surrounding climate: in thin work environments that were relatively hostile to diversity, increasing proportions of minority employees decreased both productivity and return on income, while in supportive thick environments greater diversity was associated with better outcomes. Business performance seems to be the product of diversity and climate — the critical question is whether that climate is positive or negative.

Gonzalez and Denisi’s investigation looked at restaurants rather than legal practices, but the trend that they uncovered suggests a tidy explanation for why some firms are many times more likely than others to employ a minority lawyer. The firms at the bottom of list — the practitioners of thin diversity — cultivate a climate that doesn’t just neutralize the value of diversity, but drowns it in a sea of red ink. It’s hardly a surprise that their efforts to hire underrepresented attorneys are muted or absent, and that their minority percentage remains stuck in the basement. On the flip side, thick climates multiply the value of diversity and, by extension, the minority lawyers who those firms are thrilled to hire in droves.

That discovery also sharpens the notion of a diversity threshold beyond which firms are disinclined to hire minority talent. It’s not that 15.6% is some universal magic number representing every firm’s optimal diversity; otherwise there wouldn’t be an enormous gap between first and last on the AmLaw list. Instead, the most profitable level of diversity for a given firm varies, in part, based on the nature of its diversity climate. Technically, that preserves the possibility that each firm has already met its individual threshold and decided that enough is enough — though that suggestion rests on the wildly generous supposition that every firm is successfully maximizing its own self-interest. Either way, it goes almost without saying that diversity climates aren’t immutable; a top-ranked firm can neglectfully allow its culture to deteriorate just as easily as a lagging firm can commit to building a more welcoming environment. The choice is theirs. But for the moment, at least within the bounds of their own make-believe constraints, it’s possible that even firms like Nexsen Pruet are being guided by something resembling rationality.

All the uncertainty in valuing diversity can’t help but seep into the employee-employer labor exchange. Thick and thin environment firms may well assign identical value to the direct products of an associate’s labor, only to diverge sharply on the appropriate price of a better racial mix. Still, Leong’s work teaches that, one way or another, all firms are likely to engage in racial capitalism; it’s merely a matter of whether its diversity climate makes minority employees into assets or liabilities. Practices with hostile environments will predictably see increased diversity as costly, and be less willing to pay market rate for underrepresented lawyers; because of that, absent a shift in thinking, a firm like Nexsen Pruet will continue to underhire and underutilize minority lawyers and eventually lock itself into a costly and discriminatory vicious cycle of its own construction. The White & Cases of the world, on the other hand, have resolved to empower their minority employees all the way to the bank.