Today as part of the White House event on entrepreneurship we’re announcing important changes to Microsoft’s Law Firm Diversity Program (LFDP). Since we launched this Program in 2008, we’ve provided the participating firms a bonus at the end of our fiscal year equal to 2 percent of that year’s fees if they reach a quantifiable diversity goal, either becoming more diverse as a firm or more diverse on the work they do for us. We believe the time has come now to move our program to its next generation by incentivizing and working with major law firms across the country to increase diversity among the firms’ partners and leadership ranks.
What We’re Doing. We are changing our Law Firm Diversity Program to provide each of 15 law firms who do work for us with the opportunity to earn their annual bonus based on their performance in increasing diversity[1] in three aspects of a firm’s leadership. These relate to: (1) leading the management of the law firm; (2) leading the law firm’s relationship with Microsoft; and (3) leading work on Microsoft’s legal matters.
These success bonuses will be calculated based on points earned from the metrics reported at the end of each fiscal year (June 30). The new approach will be based on the following point structure:
2 points = 0.5% bonus
4 points = 1.0% bonus
6 points = 1.5% bonus
8 points = 2.0% bonus
In addition, Microsoft will pay the highest-scoring firm an additional 1 percent, for a total bonus of 3 percent, and will publicly recognize this firm for its leadership in strengthening diversity.
| Leading the Firm | Management Committee Composition | 2 points for >25% diversity |
| Partner Composition | 2 points for >30% diversity 3 points for >35% diversity |
|
| Partner Composition Growth: average year-over-year growth (FY15 baseline) | 1 point for each 1% growth | |
| Leading the Microsoft Relationship | At least one MS Relationship Partner is diverse. | 1 point |
| Leading Microsoft Matters | Diverse Partner Hours on MS Matters | 2 points for >35% diversity |
| Diverse Partner Hours on MS Matters Growth: average year-over-year growth (FY15 baseline) | 1 point for each 2% growth |
What We’ve Learned. We have learned a lot since we began our program in 2008, and our goal is to apply this learning in the future. We have benefited enormously from the spirit of partnership between our in-house lawyers and the participating law firms as the program has moved forward. The large majority of participating law firms have earned their bonus not just once but repeatedly, with over 80 percent of the firms earning their bonuses annually. As a result, since 2008 the participating firms have increased the percentage of hours worked by diverse lawyers on Microsoft matters from 33.6 percent to 48.2 percent. We truly appreciate the constructive spirit that has produced this result.
During this same time period, our own department has become more diverse. Today 58 percent of the lawyers within Microsoft’s Legal and Corporate Affairs group are women or minorities, and just over half of our total employee population worldwide consists of women. Currently, 41 percent of the Department’s most senior positions are filled by women or minorities, as are 43 percent of my own direct reports.
As we look back at our experience, we believe that diversity has made us stronger.
While it’s impossible to assess our legal developments and identify all of the causes and effects with precision, certain trends are clear. For example, the participating law firms have been instrumental in our strengthening litigation track record. During the past three years our litigation teams have won 89 cases and lost only six, while reducing our settlement costs and legal fees substantially. Lawyers at participating firms also have helped us to advance other key aspects of our work. Their advice has helped us support a broader array of global products, reflected just last week in the worldwide launch of Windows 10. Similarly, the firms have been involved in vital ways in our patent work, where the team has grown our portfolio and licensing programs very significantly, helping us to sign 64 new patent license agreements in the past year alone.
We appreciate that results like these flow from many factors, starting always with dedicated teams and not infrequently involving a bit of good fortune. In addition, however, we believe that diverse people and perspectives, both at these firms and among our in-house ranks, have made us more creative and helped us better understand legislators, regulators and customers around the world.
In short, judged even by business results alone, we believe that our focus on this Program has represented time and money well spent.
Thinking About the Future. All of this has inspired us to take our next step. As we do so, we’ve concluded that it’s important now to focus on promoting more diversity in leadership positions in law firms.
At present, there is even less diversity among law firm leadership ranks than there is among law firms as a whole. Recent studies show many diverse lawyers beginning their practices each year, but fewer experienced diverse lawyers leading the management, practice areas and key account relationships of law firms. In fact, recent survey data from Law360’s 2015 Minority Report found that while more than 20 percent of U.S. law school enrollees have been minorities over the past decade, just 7 percent of equity partners at U.S. law firms are minorities. Overall, less than 1 percent of lawyers in the United States are African-American partners. While 33.5 percent of lawyers in law firms are female, women comprise only 21.68 percent of law firm partners, according to Law 360’s 2015 Glass Ceiling Report.
It’s hard to believe that we’ll truly succeed in fostering a more diverse legal profession unless we take new strides to encourage broader leadership opportunities for diverse people. Our hope is that through our own Law Firm Diversity Program, we can help ensure that we have not only talented, diverse lawyers in the courtroom and at the deal table, but also as the first chair lawyers and lead negotiators. And we want to ensure that deserving, diverse partners are managing our case work and leading a talented and diverse group of associates.
We know that the largest law firms can lead the way on progress towards more representation and more inclusion. Large firms have the advantage of great work, locations in large cities, and generally higher compensation than many small to medium firms. In general, they are more likely to have minority equity partner representation above the overall average of 7 percent. And while goals that measure firm leadership as a proxy for cultural and systemic change are imperfect, we believe that it is a good place to start. It is certainly clear that diversity initiatives have a higher chance of succeeding if they are visibly supported by lawyers at the highest levels of a law firm, by providing the so-called “tone at the top.” This initiative would demonstrate the “tone at the top” not only with words but with actions. In addition, we believe that more diverse leaders can become strong role models and thereby help encourage greater diversity across the profession as a whole. These leaders will bring their experience to bear in recruiting, mentoring and supporting younger professionals. As always we hope to “learn by doing,” and to improve on our measurements as we do so.
We’re proud of our progress in promoting diversity and strong business outcomes. But as a profession, the legal field still has a long way to go to become as diverse as the nation we serve. Talented and diverse leaders can help our entire profession take the next steps forward.
[1] Microsoft defines “diverse” as attorneys who are female, racial and ethnic minorities, openly LGBT, attorneys with disabilities and veterans. Reporting for the latter three groups is at the discretion of the law firms, but if reported, Microsoft requires consistency of reporting. The majority of firms in the program report on these categories.