Novartis has agreed diversity targets with its legal advisers and will impose sanctions if they not met Shutterstock
This week Novartis issued a press release with the seemingly innocuous title: ‘Novartis launches new Preferred Firm Program for legal service’.
The substance of the announcement was rather more interesting.
The company’s legal department, led by Shannon Thyme Klinger, outlined a ‘bold ambition’ to drive ‘more diversity and inclusion’ in the legal profession.
Firms will be required to make specific diversity commitments for each engagement with the overall benchmark being that 'not less than 30% of billable associate time and 20% of partner time will be provided by females, racially/ethnically diverse professionals, or members of the LGBTQ+ community'.
And if the panel firms, which include US giants Latham & Watkins and Kirkland & Ellis and UK magic circle firms Freshfields Bruckhaus Deringer and Linklaters, miss their targets on a particular matter, Novartis will withhold 15% of their fees.
In January last year a group of senior US GCs published an open letter bemoaning the lack of diversity in the senior ranks of law firms and warning that they would ‘direct our substantial outside counsel spend to those law firms that manifest results with respect to diversity and inclusion, in addition to providing the highest degree of quality representation'.
The initiative – which was echoed in Europe – attracted significant publicity both within the legal media and mainstream newspapers, including the Financial Times.
But there was also some pushback. One notable critic, Don Prophete – the only ever black name partner in an Am Law 250 firm – published an opinion piece in The American Lawyer in which he argued that “grandiose pronouncements” would be regarded as PR stunts leading to “diversity fatigue” if not backed up by practical measures.
No doubt alive to such criticism, the US GCs – who have formed the grouping GCs for Law Firm Diversity – followed up their letter by teaming up with the campaign group Diversity Lab to issue a set of practical guidelines to help GCs deliver on their pledge to boost diversity.
Item one of the guidance – entitled ‘Measure and Act’ – advises GCs when instructing outside counsel to ‘build in accountability for achieving predetermined diversity goals, set by the legal department, with rewards or consequences’.
Novartis has done just that. Furthermore, it also appears to recognise the crucial importance of transparency. The publication of its targets and the sanctions it will impose if they are not met sets an example for other companies to follow and sends a potent message to law firms.
General counsel have been historically reluctant to provide details of their preferred advisers and the terms by which they are hired.
But by publicising its targets and sanctions, Novartis has arguably done more to promote diversity and inclusion among law firms than any letter could, no matter how many senior GC signatories it attracted.