Diversity Quotas & Signal-to-Noise Ratios

The New York Law Journal is reporting that, under the auspices of the New York County Lawyers Association, "more than 60" law firms have agreed to a written pact to report to their corporate clients the makeup of legal teams by "race, gender, ethnicity, and sexual preference," and that companies such as Coca-Cola, the Bank of New York, Merrill-Lynch, and Prudential, have signed up on the other side.

Thanks to the UK's The Lawyer, we also know the firms include Arnold & Porter, Bingham McCutcheon, Cadwalader Wickersham & Taft, Cleary Gottlieb Steen & Hamilton, Dewey Ballantine, Debevoise & Plimpton, Mayer Brown Rowe & Maw, Shearman & Sterling, Sidley Austin Brown & Wood, Weil Gotshal & Manges and White & Case.  (Volokh Conspiracy commenters have been all over the story.)

Now let's just stipulate for purposes of discussion that encouraging "diversity" is a virtuous and laudable thing, and that this pact brims over with the best of intentions toward advancing that goal.  Also, not being an employment lawyer by training, I'm the wrong person to ask whether it constitutes some form of impermissible employment discrimination, and the Volokh commenters have scarcely reached a consensus either. 

For example, would I, a straight Protestant white guy, have an actionable beef if I were repeatedly asked off juicy assignments in order to make the firm's numbers?  What if that pattern ultimately cost me a shot at partnership?  And presumably, firms are now going to need to poll all their partners and associates:  What if a gay lawyer had a powerful—and, in many circumstances, fully understandable—preference for staying in the closet?  What's his obligation to tell his employer the truth?  (He probably signed something agreeing to do so as a condition of employment, and the clients have now told the firm in no uncertain terms that his sexual preference is materially germane to the firm's business.)  Do you get triple credit for an Hispanic lesbian?   Can clients object to Arab or Muslim lawyers?  If the client makes sensitive anti-terrorism homeland-defense equipment?  But enough of these hypotheticals.  

The topic du jour here at "Adam Smith, Esq." is, what economic impact will it have?

In the short run, one should expect it to raise the desirability and market value of minority and gay associates—the supply of which for all practical purposes is fixed for the next 5 to 7 years, but the demand for which seems to have just gotten a shot in the arm.  The problem is that BigLaw associates are paid, if not in absolute lockstep, close to it (even bonuses, at most firms, are tied to quantitative billable-hour quotas).  So it's not immediately obvious how BigLaw Firm X could "outbid" a competitor for a 3L fitting into one of the protected classes. 

On the other hand, there are non-monetary aspects to compensation which rival or even outweigh the paycheck itself—desirability of assignments, "lifestyle" considerations, quality of mentoring, opportunities for professional development, exposure to key clients, etc.; this is clearly the playing field on which the bidding war will have to play itself out.  (Again, we're agnostic on the question of whether this is fair to the straight white guys, we're just trying to forecast how firms might rationally behave given this new set of client incentives.)

Will the supply/demand balance change in the longer run?  I have my doubts.  The marginal increment to the overall "package" BigLaw will be offering the minorities and gays is both too small in magnitude and too far in the future, from the perspective of a college graduate contemplating law school or another career.  Its then-present discounted value is probably close to zero, and barely amounts to "noise" when contrasted with the extremely strong "signals" (both pro and con) generated by the prospect of practicing law for 40 years. 

More specifically, the differential attractiveness of specific practice areas (tax, say, or M&A) will be a far more important determinant of the hypothetical minority-3L's precise career choice than any inchoate BigClient mandate, so I foresee no radical reworking of the distribution of minority/gay lawyers.

The truly interesting question is whether the actual quality of legal service delivered to clients by will suffer, improve, or not change.  The quick, if not glib, answer is that introducing any non-meritocratic criterion will harm service quality.  But again, I think the quality controls in place at any name-brand BigLaw firm will filter out any hypothetical deterioration in work product.  Remember, we're talking about effects at the margin of the margin:  We can essentially stipulate that any first-year associate actually hired by BigLaw was at the very top of their college class, scored at the top of the LSAT's, and graduated, if not at the top, then solidly enough, from a name-brand law school.  None of these people are technically incompetent—putting it more realistically, all are equally technically incompetent as first-year's, and BigLaw has found ways of working with that unformed clay heretofore. 

Is it possible, on the other hand, that the Politically Correct Police are right, and that since (as they would have it) diversity is a per se good, the quality of services will improve as more duelling viewpoints will be brought to bear, honing the blade of advocacy in the fire of conflicting opinions?  (Sorry, I have to confess that sometimes the self-congratulatory rhetoric of the PCP gets to me.) 

Again, for the reasons above, not likely.  Sure, a company might want a woman on its sexual-harassment defense trial team, or a gay on a sexual-preference defense team, but that was true years and years before this pact was announced, as a matter of elemental strategy.  For the arcane cross-border tax question, the complex structured-finance transaction, or the mind-numbing mega-merger due diligence, will the PC ratio of the team matter?   Hard to see how.

So an economic non-event?  Yes; except in the narrowest of sand-in-the-gears senses, that it's yet another thing unrelated to their core business that BigLaw has to keep track of and report on.  Sounds like something the firms' CIO's, not their CEO's, should focus on.