'We have a crisis on our hands' - Coca Cola to punish advisers for missing new diversity targets

GC Bradley Gayton unveils new guidelines; non-compliant firms will have fees for advice reduced by 30%

Coca Cola has unveiled a series of diversity targets for its US advisers with the threat that their ability to meet them will be a ‘significant factor’ in determining whether they make its first-ever preferred panel of law firms in 18 months' time.

The beverage giant’s revised guidelines for its US advisers were unveiled today by its general counsel, Bradley Gayton, along with a pledge to roll them out globally in due course.

Firms that fail to meet targets for new matters – which include that 30% of each of billed associate and partner time will be from diverse attorneys, half of whom are black attorneys – over two quarters will be levied a non-refundable 30% reduction in their fees from then on until they achieve compliance.

This minimum commitment will be adjusted over time in line with US census data ‘with an ultimate aspiration that at least 50% of billed associate time and billed partner time will be from diverse attorneys’.

The guidelines warn firms that meeting the detailed set of commitments will be a significant factor in determining their success at a panel review be held in 18 months' time.

“We are too quick to celebrate stagnant progress and reward intention,” Gayton said in an open letter sent out to all Coca Cola’s US advisers today and published on LinkedIn. “We have a crisis on our hands and we need to commit ourselves to specific actions that will accelerate the diversity of the legal profession. Our profession needs to be representative of the population it serves. All of us in leadership positions need to be the drivers of that change - and we will be better for it.”

According to Coca Cola an array of its advisers have already expressed their support for the targets including Cleary, Greenberg Traurig, Hogan Lovells, Littler, McDermott, Proskauer, Shook Hardy and Skadden.

The headline targets are underpinned by more detailed metrics designed to ensure that firms don’t take short cuts to meet their targets, which include a requirement that managing partners publish ‘measurable’ diversity goals and the provision of ‘transparency as to how origination, relationship and matter credit is apportioned on KO matters’.

Advisers must also put forward 'two or more diverse attorneys, at least half of whom are black, as candidates for succeeding to the relationship partner role with KO'.

And if firms are struggling to meet their targets, they are encouraged to collaborate with other firms including member firms of the National Association of Minority and Women Owned Law Firms.

The initiative is the latest of a wave of measures being taken by the profession to improve diversity within its ranks that gained significant momentum in the wake of the of Black Lives Matter protests that were sparked by the police killing of George Floyd in Minneapolis last May.

The sanctions are notably harsher than those set out by Novartis for its advisers last year, when it said it would withhold 15% of fees if its targets were not met.

‘We will no longer celebrate good intentions or highly unproductive efforts that haven’t and aren’t likely to produce better diverse staffing,' said Gayton. 'Quite simply, we are no longer interested in discussing motivations, programs, or excuses for little to no progress – it’s the results that we are demanding and will measure going forward.’

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