Two Recent Diversity Initiatives: One Carrot and One Stick

Corporations normally employ both in-house and outside counsel to handle its legal matters.  In recent years, many global companies have begun paying closer attention to zcarrot-and-stick-incentivethe diverse makeup of the outside firms they hire.  The [logical] thought being that, if the company is going to put an emphasis on a diverse workplace, why shouldn’t it hold their contractors to the same standards?  Wal-Mart and Microsoft have recently announced plans to improve diversity in very proactive ways taking very different approaches.  One could say they represent the carrot-and-the-stick approach. 

Microsoft’s Carrot

Microsoft’s recently announced diversity initiative is the “carrot” approach–designed to reward firms that comply with its requests.  The plan is to award bonuses to outside counsel based on their inclusion of minority and women attorneys.  The plan will apply to the company’s 17 “Premier Preferred Provider” law firms, which are said to receive about $150 million a year in fees.

Wal-Mart’s Stick

Wal-Mart, the country’s largest private-sector employer, has deployed new proprietary software to monitor the diversity in the law firms it hires.  The software will monitor whether the attorneys hired as outside counsel to work on Wal-Mart matters are diverse. Firms that fail to meet the ongoing criteria will be dropped as counsel.