It's no secret that women earn less than their male colleagues at law firms — the National Association
of Women Lawyers concluded last year that female equity partners make an average $66,000 less a year.
An extensive
study released this week surveyed more than 700 women partners about their views of the compensation gap and analyzed the
factors that lead to disparity in pay. The study, "New Millennium, Same Glass Ceiling: The Impact of Law Firm Compensation
System on Women," was undertaken in partnership between the Metropolitan Corporate Counsel Association (MCCA) and the Project
for Attorney Retention, an arm of the Center for WorkLife Law at the University of California Hastings College of the Law.
The National Law Journal spoke with PAR Director Joan Williams about possible solutions to the law firm gender
pay gap. Her answers have been edited for length.
For more on the report, see
this report in the NLJ-affiliated blog, The Careerist.
NLJ: What do law firms need to do to make their
compensation system fair to women and minorities?
Joan Williams: First of all, law firms need to
improve transparency. A large percentage of the women partners we surveyed had no clear understanding of the way their firm's
compensation system works. A significant part of that, I suspect, is because a lot of the decisions are made informally and
behind closed doors.
The next thing is, law firms need to start measuring. I was speaking with a lawyer who said that
when her firm counted where women fell in terms of compensation, two-thirds of the women were in the bottom third. Firms aren't
going to know that or be able to analyze whether that presents a problem unless they count and measure compensation.
A
third thing is very straightforward. There is a marked lack of diversity on committees that handle compensation. Large numbers
of the women surveyed had either one token woman or no women on their compensation committee. The picture looked even bleaker
for minorities.
Another perceived problem is that individual cash flow factors are probably overvalued in compensation
decisions, according to the women surveyed and law firm compensation consultants. Institutional investment measures are undervalued.
Finally, there clearly needs to be a redesign of origination credit.
NLJ: What's wrong with
how most firms handle origination credit?
JW: The most basic problem is that according to law firm
consultants, roughly 80% of law firm compensation can be explained solely by a reference to origination credit. That's a huge
percentage. This is part of the overweighting of certain factors and the underweighting of other factors that hurt women.
NLJ: How should firms handle origination credit — which is given to attorneys who bring business
to the firm — to ensure that compensation decisions are fair?
JW: The first thing is that,
in my view, origination credit should not be inheritable [passed from one attorney onto another of their choosing]. The purpose
of origination credit is to stop rainmakers from leaving. If the rainmaker is leaving, there is no more rationale for the
origination credit. The inheritability of origination credit probably has a significantly negative impact on women and people
of color. A pervasive complaint is that women and people of color are invited into pitches, but then they don't benefit when
the firm gets the work. This could be eliminated by a clearly stated and widely disseminated policy that states that if you
invite someone to a pitch, they need to be given part of the origination credit that results from the pitch.
NLJ:
I suspect firms rely on factors such as billable hours and origination credit to set compensation because they are fairly
easy to quantify. How should firms quantify the institutional investments that disproportionately fall to women, such as associate
development?
JW: Many companies have designed systems that do exactly that. In the report, I quote
extensively from one such system at Ernst & Young, and show how they count origination credit but they also count institutional
investments. There are pre-existing and highly sophisticated systems, and law firms need to begin to think about turning to
those systems.
NLJ: You mentioned the lack of diversity on compensations committees. How should firms
go about changing who gets onto those committees?
JW: The clear recommendation is for more diversity
on compensation committees. That said, implementing that might not be easy because at many firms, the committee that decides
compensation is elected. When you have only 16% of equity partners nationwide who are women, women are much less likely to
be elected — even in the absence of gender bias. Women tend not to be elected to the powerful committees, and so management,
with the best intentions in the world, tends to put them on committees like associate development and diversity, which counts
for very little when compensation times comes around.
NLJ: What's at stake if firms don't make the
kinds of changes you are advocating?
JW: More of the same. That's what's at stake. I was frankly
astonished at the level of anger of many senior women over compensation. We undertook this study with MCCA at the urging of
the ABA Commission on Women. Clearly, the ABA commission knew something that I didn't, which is that this is a big, big problem.
Many senior women are upset about this and are leaving because of this. If firms are serious about wanting to increase what
is, admittedly, a very low percentage of women among equity partners, they're going to have to address this problem in an
effective way. Otherwise, women will leave. Often women will say they are leaving because of family reasons, which is a socially
acceptable excuse that doesn't burn bridges. I have become convinced over the course of this study that when many senior women
leave, the problem stems from compensation.
Contact Karen Sloan at ksloan@alm.com.
