Coca Cola asserts to withhold fees unless law firms improve diversity

[Main source: Law Gazette] 

Coca-Cola has become the most recent company to threaten to withhold fees from law firms unless they improve their act in increasing diversity and inclusion. This latest move applies to the US, but this could be an indication for all law firms globally.

The senior vice-president of Coca-Cola and global general-counsel, Mr. Bradley Gayton told US law firms in a letter that the statement is done with a ‘heavy heart’. He goes on to say that ‘diversity is very important. Summits, Committees, and Action plans are ways of improving, but these efforts are not enough. This coupled with an alarming statement that black equity partners will not reach equality with the black US population until 2391.’

He claims that the legal profession does not consider diversity as an imperative in businesses, and companies quickly celebrate false progress and reward the intention of trying to improve diversity within businesses. In short, he said that there is no interest in discussing why there has been little or no progress in diversity and inclusion. There seems to be an obsession with demanding results and measuring those results will help us in the future.

The Coca-Cola letter includes the counsel diversity guidelines. It states for each new matter, 30% of billed associate and partner time must be from BAME lawyers, and at least half of that must be from black lawyers.  Failure to do this over two quarterly reviews will result in the deduction of 30% of the fees for future matters until the guideline is fulfilled.

The above actions only apply in the US, but Coca-Cola wants to apply these initiatives globally. Coca-Cola is just the most recent company to use its power to push for improved diversity within the legal profession. It also shows how Coca-Cola has followed other organisations, which in the past, have recognised the lack of diversity and threatened law firms to do a better job.  

In February 2017, the US tech giant HP threatened to withhold up to 10% of invoiced fees by law firms that failed to meet the minimum number of a diverse staff. The company described the move as implementing a ‘diversity holdback‘ mandate. However, HP says many law firms already have teams that meet the requirements, so it was more likely that this mandate will never apply at any point. 

Subsequently, more than 170 US-based general counsels threatened to pull their millions from ‘largely male and white firms’. Around January 2019, more than 170 general counsel who spent millions of dollars on law firms told these law firms that they will take their readies to other law firms who can meet diversity requirements. Ms. Michelle Fang, Chief Legal Officer at Turo, who posted the letter, said the group would welcome those across the world.

Quite recently, in April 2020, in the UK, telecoms giant BT revealed that it would offer guaranteed panel renewal for the firm with the best diversity and inclusion record. BT is a certifier to the General Counsel Statement in Support of Diversity and Inclusion and the Law Society’s Diversity and Inclusion Charter. A total of 15 law firms was chosen from 40 different law firms. The firms will advise on all UK and international legal matters under an agreement.

BT’s transformation director, Mr. Dave Hart, said multiple factors go into picking the firms like culture, experience, expertise, and innovation besides diversity and inclusion. Hart said that the firm with the best D&I record across all levels will ‘automatically be offered a slot on the next panel’. This implies that the law firms who already have immaculate records of D&I will continue to be offered these slots and will dominate on the panels until other law firms clean up their acts in regard to their D&I records.

Ultimately, Coca-Cola is the most recent giant to try to improve diversity and inclusion within law firms and businesses in general. Similarly for HP and BT, it’s not the first time that a large corporation is demonstrating their value for D&I within the legal profession. However, most of these improvements apply within their own domestic countries and are yet to be implemented globally. But at least it shows how other organisations are now recognising the lack of diversity which triggers law firms to do a better job.

Omer Suhail

I'm Omer Suhail, a driven and motivated LPC Graduate. I am looking to continue my career within the legal sector that will broaden my skills and knowledge that my degree and LPC has already taught me. I have completed various work experience schemes alongside my degree with firms such as DAC Beachcroft, Blake Morgan, and Kelcey and Hall Solicitors and Advocates. I completed my LLB and LPC degree at the University of West of England.

Omer Suhail

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