Ethnic Minority Partners Disproportionately Placed in Nonequity Partnership Tier

More than half of all minority partners are nonequity partners, according to an analysis by The American Lawyer.

October 08, 2019 at 05:00 AM

8 minute read

The original version of this story was published on The American Lawyer

Minority lawyers disproportionately occupy the nonequity partnership tier of the nation's largest-grossing law firms compared to their white colleagues.

An American Lawyer analysis of 148 firms with two-tiered partnership structures, 131 of which ranked in this year's Am Law 200, shows that minority lawyers are not only more likely to have nonequity partnership status, but that they are moving into the nonequity tier at triple the rate of white lawyers. The analysis is based on five years of survey data.

The revelations come at a time when the push for diversity in law firms is placing more emphasis on the partnership level, which historically has meant equity and a seat at the table. But not all law firm partnerships are created equal: Law firms have been rapidly expanding a nonequity partnership tier. And while equity partners are more likely to have an opportunity to influence the direction of a firm and share directly in its profits, nonequity partners are not.

"Equity partners are the ones that have the power at a law firm. Who's being hired, who's getting choice work. They're the ones that control the politics of the firm," said Michelle Fang, chief legal officer at alternative rental car company Turo, who wrote an open letter in January signed by more than 200 general counsel demanding increased diversity in the legal profession.

To be sure, more white lawyers are becoming nonequity partners than are making equity partner, as law firms rapidly increase the nonequity ranks as a way to boost profits per equity partner.

But the number of minority nonequity partners grew by 34% between 2014 and 2018—a rate that was 16 percentage points greater than the growth rate for minority equity partners and more than triple the 10% growth rate of white nonequity partners.

Of the minority lawyers who made partner at one of the 148 firms in 2019, 54% were promoted to or joined as a nonequity partner—a shift of 10% from 2014.

Over that same time, 466 minorities were promoted to nonequity partner—more than double the number of minority equity partners that came into these firms over the same period.

White partners, on the other hand, are still more likely to have equity status than nonequity. More than 58% of white partners were equity partners, and 42% were nonequity in 2018, the most recent year in which data is available.

Several prominent Am Law 100 firms showed notable discrepancies in their minority and white nonequity partner representation, including Proskauer Rose; Latham & Watkins; McDermott Will & Emery; Crowell & Moring; Pillsbury Winthrop Shaw; Quinn Emanuel Urquhart & Sullivan; and Duane Morris.

No one at Latham, Proskauer, Quinn Emanuel or Pillsbury responded to a request for comment.

But Duane Morris diversity and inclusion officer Joe West did not dispute the findings. He attributed the discrepancy at his firm and others in part firms to firms focusing on geographical regions or specific practice areas in their lateral hiring rather than emphasizing diversity. Hiring that way, he said, brings no guarantee of diversity.

"We've grown organically by following the business and by adding groups in subject matter and geographic areas that make sense for our strategy," he said. "You have much less control, and that act alone could skew the numbers."

Crowell & Moring management committee chair Philip Inglima said the difficulty most firms face in closing the gap stems from the fact that generation after generation, lawyers at his firm and others have not been diverse.

Both Duane Morris and Crowell & Moring say they are making systemic changes to try to get more minority lawyers on the equity track—overhauling their assignment systems to reduce bias and working with outside organizations such as Diversity Lab, for example.

"That kind of change is needed to overcome the effects of multiple generations of lawyers at firms like ours which had few diverse partners," he said.

While it is true that minority lawyers have made inroads into the partnerships of Big Law, the pace has been incremental. In 2014, minority partners accounted for 8% of the total partnership at the surveyed firms. Five years later, minorities now account for 10% of the overall partnership.

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The analysis looked at more than 32,000 U.S. lawyers within 148 firms that responded to an annual diversity survey conducted by ALM, the parent company of The American Lawyer, every year from FY 2014 through FY 2018. In order to assess shifting demographics within two-tier firms, those firms that did not have a nonequity tier for any year during that period were excluded from the analysis.

Several Am Law 100 firms—Kirkland & Ellis; King & Spalding; Gibson, Dunn & Crutcher; Bryan Cave Leighton Paisner; and Sidley Austin—do have a nonequity tier but were likewise excluded from the analysis because they did not specify whether partners were equity or nonequity in their survey responses.

The American Lawyer's analysis aligns with similar findings made by the National Association for Law Placement, which released a report in April that found that 55% of the 2018 minority partnership was nonequity. The NALP study included 21,026 partners from multitiered firms and found that the proportion of minority nonequity partners increased by two percentage points between 2011 and 2018.

Nonequity tier grows across the board

White partners have not been immune to the industrywide shift toward nonequity partnership. The number of white nonequity partners at the surveyed firms grew by 1,244, or 10%, between 2014 and 2018, while the number of white equity partners actually fell by 834 lawyers, or nearly 5%, in that period. It's unclear how much of the shift is due to firms de-equitizing partners.

The decline is more of a testament to the industrywide adoption of nonequity partners as a profit-driver rather than an influx of minority equity partners. In 2014, the number of nonequity partners at the firms included in the analysis totaled 13,251, accounting for 43% of all partners. In 2018, that number totaled 14,961, accounting for 47% of all partners.

Whether a growing nonequity tier is bad for the legal industry is up for debate. Some in the profession say that in an industry facing swelling head counts and slackening demand, building up a nonequity partnership is a savvy business strategy. Others see nonequity status as proverbial limbo and a way to avoid difficult conversations about performance.

Regardless, many diversity advocates say that disproportionately funneling minority partners into the nonequity tier is problematic. They say at best it stymies the goal of diversifying the profession. And at worst it amounts to nothing more than a misleading tactic on the part of law firms.

Much of the discussion about progress in law firm diversity has moved from representation and recruitment, such as when firms tout their 50% minority first-year associate class, to the issue of retaining women and minority lawyers. But the question of successful minority retention is very much tied to whether minorities are represented in firm partnerships.

For example, renowned programs like the Mansfield initiative, established by the legal diversity organization Diversity Lab, specifically highlight equity partnership rates and leadership positions on executive and compensation committees—roles that are almost always held by equity partners.

Fang, whose open letter about diversity at law firms drew widespread attention, is of the view that true progress will not occur unless real strides are made at the equity tier. Otherwise, it's not true diversity and inclusion—it's diversity and inclusion in name only, she says. And general counsel will not accept a two-tiered system they view as separate and unequal—one that creates and perpetuates a first- and second-class status.

Clients will "peek behind the veil," Fang said, noting that a two-tiered system in which minorities mostly occupy the second tier will not propel the needed change in the power dynamic at law firms.

"You're going to continue to see the most influential partners mentoring the people that remind them of themselves," she said.

Ben Hancock contributed to this story.