In 2020, during the midst of the Covid-19 pandemic, a rapid succession of events forced Americans to take a hard look in the mirror regarding systemic racism. Profound national conversations ensued. Many in the financial services industry published statements emphasizing their commitment to diversity and inclusion, but few statements did what 12 general counsels were able to accomplish in September 2020. In an open letter addressed to the legal community, general counsels of some of the world's largest financial institutions came together to not only discuss the violence against the Black community and their commitment to diversity and inclusion, but more importantly, to make meaningful change by setting an example and publicly committing to an action-driven statement.
Law firms and financial institutions in the United States have made progress with respect to women and people of color representation, but these populations remain starkly underrepresented, particularly in senior level positions. For example, women and people of color make up approximately 47.5 percent and 26.5 percent of law firm associates in US law firms, respectively.1 However, Black women and Latinx women each represent less than 1 percent of all partners in US law firms.2 In a study of 44 of America's largest banks, minorities made up approximately 42 percent of the banks' workforce in 2018.3 That representation dropped precipitously at the executive and senior level positions for the banks — the study found that minorities accounted for only 19 percent of executive and senior level employees.4 This significant drop in representation at senior levels is also seen among women in the financial services industry. Consider this financial-services representation chart5 by corporate role, gender and race in 2021.
To address these issues and the open letter, Katten hosted a panel discussion on November 18 during Katten's 2021 Annual Financial Markets Litigation and Enforcement Symposium Series. The panel — led by Financial Markets Litigation and Enforcement partner Nicole A. Saleem and including Markus U. Diethelm, Of Counsel, UBS; Marie P. Merritt, Managing Director, JPMorgan Chase, Lani Quarmby, Associate General Counsel and Managing Director, Bank of America, and Alita Wingfield, Managing Director and Head of Compliance Training, Morgan Stanley — weighed in on initiatives implemented and lessons learned over the last year in the context of the financial services industry's commitment to: (1) internal actions, (2) external supplier engagements and (3) social action efforts to increase diverse representation and retention.
The panelists candidly discussed the need for law firms and in-house legal departments to promote positions in the financial services industry among minority communities. They provided examples of initiatives the banks have implemented over the last year to ensure that progress was being made including potential solutions to increase recruitment, retention and promotion of diverse employees and how they intend to engage more with diverse external counsel. They also recognized that the pandemic has offered a unique opportunity for law firms and in-house attorneys to reach minority communities to provide critical pro bono services and resources during these challenging times.
The following provides an overview of the panelists' thoughts regarding initiatives and actionable steps that can be implemented by the financial services industry and legal profession to continue to increase diverse representation in the financial services and legal profession.
Pillar 1: Internal Action — recruitment, retention and promotion of diverse attorneys
Recognizing that diverse representation cannot happen without meaningful consideration of qualified diverse candidates at the recruitment stage, law firms and companies have increasingly begun to formally expand their consideration of a broader pool of candidates. For example, the Mansfield Rule, which was created to increase diversity in law firm recruitment and promotion, requires that law firms seeking to achieve certification under the rule to consider women and attorneys of color for at least 30 percent of leadership and governance roles, equity partner promotions and senior lateral positions. In the more general corporate context, the Nasdaq Board Diversity Rules, approved in August, require Nasdaq-listed companies to publicly disclose statistics concerning board diversity and, most notably, to have, or publicly disclose why they do not have, at least two diverse directors.6
In order to ensure that such consideration of diverse candidates translates to the hiring of more diverse employees, law firms and financial institutions can implement various initiatives. For example, strong diverse candidates who are not hired for a current opening, can become part of a pool of candidates considered for future openings. Law firms and financial institutions can take it one step further by shifting their respective organizations' perspective on hiring. Instead of rejecting a candidate, particularly a diverse candidate, because they do not possess the exact qualifications needed for an open position, an organization can foster an apprenticeship environment to train and improve candidates' skills in required areas. This approach, can not only increase the recruitment of diverse candidates, but also their retention, by ensuring high-level leaders are involved in the training of diverse employees and providing them opportunities to build cross departmental skills and relationships.
Pillar 2: External Action — Measuring staffing, advancement and leadership of diverse employees
The impact that in-house attorneys at global and local companies can have on diverse representation present at their law firm partners cannot be understated. Setting the expectation that the staffing of diverse associates is a critical consideration when selecting law firms, along with other criteria, can drive law firms to ensure diverse associates are involved in all aspects of new matters. Some organizations review various metrics and other information to assess representation and engagement of diverse associates in law firms, such as requesting their law firm partners to conduct self-evaluations of their internal culture and community outreach efforts to ensure that diverse associates included on the team have substantive roles in the engagement.
When law firm partners are underperforming with respect to the diversity efforts in staffing, promotion and retention of diverse associates, some organizations have committed resources to help them improve. Indeed, as law firms improve their efforts concerning diversity and inclusion, their success can be shared and drive others to adopt their best practices.
In-house attorneys can also create connections between their organization and diverse associates in law firms to increase opportunities for diverse associates to develop client relationships. Some institutions are developing mentorship programs that match mentors from their organization with diverse associate mentees from their law firm partners, to assist diverse associates in navigating career challenges.
Pillar 3: Social Action — pro bono, racial injustice and community initiatives
In order to significantly increase diverse representation in the financial services industry, law firms and in-house counsel cannot merely focus on the recruitment of diverse law school candidates, but instead must drive interest and engagement among students from diverse backgrounds at an earlier stage. Some organizations have created internships and programs that expose diverse students in high school or earlier to the financial services industry to demystify financial markets, products and other unfamiliar legal topics. These programs further instill in diverse students, at an early age, that diverse attorneys can and do succeed in the financial services industry.
In terms of recruitment and engagement, law firms and in-house legal counsel need to continually evaluate the types of colleges and universities they consider for positions. For example, institutions can meaningfully consider diverse candidates from Historically Black Colleges and Universities, for mentoring, recruitment and other programs. Expanding the field of applicants that are considered, will foster an environment in which diverse employees in law firms and in-house legal departments feel welcome and valued, ultimately increasing representation and retention of diverse employees in the financial services profession.
The impact of the pandemic has also created an increased need for communities, especially among ethnic and immigrant communities, for pro bono legal assistance. Being able to provide pro bono legal services remotely, via various platforms and programs, has allowed in-house counsel and law firms to expand their reach to the communities they are able to serve. In particular, in light of recent events, some organizations have also focused their pro bono efforts on racial injustice and providing resource pipelines to underrepresented groups.
What's ahead?
Looking to the future, we can expect in-house counsel to continue to make diverse staffing and representation, at the pitch stage and throughout the engagement, a priority in selecting law firms for new matters. Institutions can also continue to focus on discrete areas concerning diversity and inclusion, including taking a more intentional approach to their internal development of diverse employees and continuing to train on implicit bias and management skills. As institutions improve their diversity and inclusion efforts, other institutions need not recreate the wheel, but instead can adopt the successful initiatives in their own organizations, to create widespread improvement in the financial services industry.
Read more coverage from the 2021 Annual Financial Markets Litigation and Enforcement Symposium Series:
The State of Futures: Emerging Trends and Enforcement Priorities
Market Trading Trends: Expect Regulatory Guidance to Accelerate
Securities Regulatory and Enforcement: Four Asset Management Trends
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