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MICROSOFT CORPORATION

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Law-Firm Clients Demand More Black Attorneys

11/02/2020 | 05:45am EST

By Sara Randazzo

Law firms have spent years promising to hire and promote more Black lawyers. Their corporate clients are now pressuring them to show results.

Companies including Microsoft Corp., U.S. Bancorp, Uber Technologies Inc. and Intel Corp. are asking the law firms they hire to detail how many diverse lawyers they employ and whether those lawyers are assigned meaningful work. Firms that don't have good answers might lose out on bonuses or not get hired.

"What gets done is what gets rewarded," said Shannon Klinger, chief legal officer of pharmaceutical company Novartis AG, which withholds 15% of legal fees if diversity benchmarks aren't met.

Client demands swelled this year, driven by the national debate about race and equity. "Lightning struck," said Joel Stern, who leads an association of minority- and women-owned law firms. "People are calling up saying, 'Show me the Black lawyers...show me the Black law firms.' "

At Microsoft, law firms in the company's preferred network can earn back as much as 3% of their fees as a bonus if they hit diversity targets. Starting in January, Intel will only hire U.S. law firms whose U.S. equity partnerships are comprised of at least 21% women and 10% underrepresented minorities. Other companies ask firms for an accounting of diversity figures without setting specific targets.

About 2% of partners at U.S. law firms and less than 5% of attorneys in the lower ranks are Black, figures that have barely budged for decades, according to the National Association for Law Placement, or NALP. In law schools, Black students make up less than 8% of total enrollment, compared with about 13% of the U.S. population, and are more likely to attend lower-ranked schools largely ignored by the most prestigious law firms.

While law firms have improved at recruiting minority associates, Black lawyers say they aren't given enough high-profile work to ensure a place on the partnership track and aren't handed client relationships in the same way as white colleagues.

"You'll see the same associate staffed on all the great cases and think, 'Why am I not getting those same opportunities?' " said Duvol Thompson, a partner at Holland & Knight LLP. He recently helped compile a survey of 60 Black male lawyers that concluded: "The consistent challenge is attempting to rise through the ranks based on knowledge, experience and ability rather than being minimized, diminished or judged based on the color of our skin."

Chaka Patterson, the general counsel of nursing- and medical-school operator Adtalem Global Education, decided this year he had heard too many times that big-money deals can only be trusted to the same cadre of mostly white lawyers who have handled such assignments in the past. Such thinking "reinforces the status quo," said Mr. Patterson, who is Black.

When his Chicago-based company set out this spring to buy for-profit online educator Walden University in a $1.5 billion acquisition, Mr. Patterson recruited experienced Black law partners in the three specialty areas he needed: mergers and acquisitions, finance and regulatory law.

He turned to M&A lawyer Catherine Dargan, a Harvard Law classmate from the law firm Covington & Burling LLP; Janine Jjingo, a finance partner at Skadden, Arps, Slate, Meagher & Flom LLP; and his longtime regulatory lawyer, LaKeisha Marsh at Akerman LLP.

During the team's first video call, Ms. Dargan sent a note to her law partner Amy Wollensack: "Ok, so I've never experienced this. Just pausing on 4 black women partners involved in this deal."

Ms. Dargan said the makeup of the team was unlike any she had been on during her 25-year career.

Many companies don't want to take the risk of hiring people they have never worked with before, Ms. Marsh said, which limits opportunities for up-and-coming lawyers of color. "You won't know what you're comfortable with unless you step out and try something different," she said.

Mr. Patterson said he has been assertive -- and at times aggressive -- trying to persuade other general counsel to hire Black lawyers. In late July, after seeing several Black lawyers post career frustrations on LinkedIn, Mr. Patterson gathered 30 Black general counsel and 30 Black law-firm partners on a two-hour videoconference call to talk about ways to help.

"There was a lot of momentum for something like this," he said.

Similar demands have been made to help diversify the historically white, male advertising industry. This year, a group of Silicon Valley startups led by SurveyMonkey pledged to track diversity in the ranks of law firms, investment banks and other companies they hire.

In any given year, a handful of the nation's largest law firms have no Black partners. Elite law firm Cravath, Swaine & Moore LLP, which has 500 lawyers, has had one Black partner in its centurylong history. On Thursday, it named two more. A spokeswoman for the firm said diversity and inclusion is "a priority and work in progress."

April Miller Boise, the general counsel at power-management company Eaton Corp., said many law-firm leaders have historically attributed the departure of Black and other minority lawyers to recruitment and better jobs. She said fewer lawyers would leave if they were offered attractive opportunities.

Attrition rates for minority associates were 22%, compared with 17% for white associates, according to a study this year by the NALP Foundation, an industry research group, and legal recruiting firm Major, Lindsey & Africa. Law firms were more likely to attribute the exit of Black lawyers to problems with their work compared with white, Asian or Latino lawyers who leave, the study found.

More than 150 law firms and corporate legal departments have pledged to increase diversity by joining an initiative that requires employers to field a minimum proportion of diverse candidates for every hire and promotion. It is known as the Mansfield Rule, named for Arabella Mansfield, the first woman admitted to practice law in the U.S.

James Chosy, the general counsel of Minneapolis-based U.S. Bank, said he signed up his department for the Mansfield Rule, run by a San Francisco-based group called Diversity Lab, and urged all the law firms he hires to do the same. "For a profession that's supposed to be all about equality, opportunity and justice," he said, "we should be first, not last."

Write to Sara Randazzo at sara.randazzo@wsj.com

(END) Dow Jones Newswires

11-02-20 0544ET

Stocks mentioned in the article
ChangeLast1st jan.
ADTALEM GLOBAL EDUCATION INC. 0.49% 38.75 Delayed Quote.14.14%
DOW JONES AFRICA TITANS 50 INDEX 0.35% 543.37 Delayed Quote.2.30%
EATON CORPORATION PLC -0.56% 124.43 Delayed Quote.4.15%
ENTERPRISE BANCORP, INC. 1.91% 28.28 Delayed Quote.10.68%
GLOBAL EDUCATION LIMITED -2.90% 53.65 Delayed Quote.-20.16%
INTEL CORPORATION -9.29% 56.66 Delayed Quote.25.37%
MICROSOFT CORPORATION 0.44% 225.95 Delayed Quote.1.15%
NOVARTIS AG 0.37% 85.93 Delayed Quote.2.73%
S&P AFRICA 40 INDEX -0.48% 176.06 Delayed Quote.2.26%
THE BANCORP, INC. 3.09% 17.34 Delayed Quote.23.22%
UBER TECHNOLOGIES, INC. -2.65% 54.31 Delayed Quote.6.49%
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Financials (USD)
Sales 2021 158 B - -
Net income 2021 51 435 M - -
Net cash 2021 76 850 M - -
P/E ratio 2021 33,4x
Yield 2021 0,96%
Capitalization 1 708 B 1 708 B -
EV / Sales 2021 10,3x
EV / Sales 2022 9,21x
Nbr of Employees 163 000
Free-Float 99,9%
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Number of Analysts 37
Average target price 247,93 $
Last Close Price 225,95 $
Spread / Highest target 26,1%
Spread / Average Target 9,73%
Spread / Lowest Target -2,63%
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Satya Nadella Chief Executive Officer & Non-Independent Director
Bradford L. Smith President & Chief Legal Officer
John Wendell Thompson Independent Chairman
Kirk Koenigsbauer COO & VP-Experiences & Devices Group
Amy E. Hood Chief Financial Officer & Executive Vice President
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