13 February 2020

Novartis to withhold fees from legal advisers who miss diversity targets

Swiss pharma giant unveils new law firm panel along with commitment to 'reimagine' how it procures legal advice

Novartis to withhold fees to legal advisers who miss diversity targets

Novartis has pledged to 'reimagine' how it instructs law firms and other legal services providers. Shutterstock

Novartis has agreed diversity and inclusion targets with its new roster of preferred global and US law firm advisers and will withhold 15% of their fees if they are not met.

The new policy was set out today by group general counsel Shannon Thyme Klinger as part of a pledge by the Swiss-based pharmaceuticals giant to ‘reimagine’ how it instructs law firms and other legal services providers.

“We recognize that corporate legal departments have an incredibly important role to play in ensuring that the legal profession accelerates its efforts to make meaningful progress when it comes to diversity and inclusion,” she said.

All 22 firms on the panel – which include US giants Latham & Watkins and Kirkland & Ellis and UK magic circle firms Freshfields Bruckhaus Deringer and Linklaters - will be required to make specific diverse staffing commitments for each engagement. 

The minimum requirement is that 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, with an expectation that such commitments will move to parity over the next several years’, Novartis said in a statement.

It added: ‘If a firm does not meet its agreed-upon diverse staffing commitment for a particular matter, Novartis will withhold 15% of the total amount billed over the life of that specific matter.’

Novartis has also pledged to use technology and data analytics to simplify the firm selection and engagement process and ‘to design fee models that replace time-based billing with financial remuneration tied to the value that the Novartis legal team jointly creates with its law firms’. 

The programme forms part of a wider pledge by Novartis to achieve pay equity and transparency by 2023 and support the UN’s Human Rights global LGBTI business standards.

It is the latest of a series of initiatives to boost diversity and inclusion within the legal profession.

Last year, more than 200 US general counsel put their names to an open letter to law firms that complained that “many law firms continue to promote partner classes that in no way reflect the demographic composition of entering associate classes”.

The letter warned: “We, as a group, will 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.”

Earlier this month, five US law firms teamed up to pledge a total of $5m to explore how to improve diversity and inclusivity in the legal profession over a five-year period.

The Novartis panel is as follows:

Alston & Bird

Arnold & Porter

Bird & Bird

Brinks Gilson & Lione

Freshfields Bruckhaus Deringer

Gibson, Dunn & Crutcher

Goodwin Proctor

Greenberg Traurig

Hogan Lovells

Kirkland & Ellis

Latham & Watkins

Linklaters

Mayer Brown

Morgan, Lewis & Bockius

Morrison & Foerster

Munger, Tolles & Olson

O’Melveny & Myers

Sullivan & Cromwell

Troutman Sanders

Williams & Connolly

Wilmer Cutler Pickering Hale and Dorr 

Womble Bond Dickinson

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