CMCP Diversity Business Matters

cmcpmagazine

A report on corporate programs supporting business for diverse outside counsel

Diversity Business Matters:

Corporate Programs Supporting

Business for Diverse Outside Counsel

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Corporate Participants

AT&T

E.l. du Pont de Nemours and Company, Inc.

Gap Inc.

Microsoft Corporation

Pacific Gas & Electric Company

Sempra Energy utilities

Wal-Mart Stores, Inc.

MINORITY COUNSEL PROGRAM

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Marci Rubin, Executive Director

California Minority Counsel Program

Board of Directors

Deborah Broyles, Co-Chair

Reed Smith, LLP

Mark Zemelman, Co-Chair

Kaiser Foundation Health Plan, Inc.

Corporate Representatives

Ted Gizewski

Microsoft Corporation

Irving S. Gomez

Intel Corporation

Mimi M. Lee

Chevron Global Upstream and Gas

David Otsuka

Wells Fargo Bank

Hyun Park

PG&E Corporation

James Potter

Del Monte Foods

W. Davis Smith

SDGE, a Sempra Energy Utility

Vanessa Washington

Bank of the West

Majority Law Firm Representatives

Patricia Lee-Gulley

Gordon & Rees, LLP

Dale W. Lum

Sidley Austin, LLP

Anna Masters

Winston & Strawn LLP

James Nguyen

Davis Wright Tremaine LLP

Guy Rounsaville Jr.

Allen Matkins, Lech, Gamble, Mallory &

Natsis LLP

Garner Weng

Hanson, Bridgett, Marcus, Vlahos & Rudy,

LLP

John G. Yslas

Foley & Lardner LLP

March 2011

For over the past decade, I’ve been proudly involved in the legal diversity movement and

witnessed the diversity dialogue grow increasingly stronger. However, like many legal diversity

advocates, I often find myself wishing there is more action to go along with the talk.

More action is especially needed when it comes to opportunities for diverse outside counsel to

attract business from corporate clients. While supporting business development for outside

counsel is far from the only element in the diversity dialogue, it remains among the most

important. It is also a hallmark of the California Minority Counsel Program.

CMCP’s slogan is “Diversity Matters.” Not only does diversity matter, “Diversity Business

Matters.” Let’s face it – money talks. Becoming successful rainmakers will help diverse outside

lawyers develop the career victories and influence needed to effectuate more diversity change in

their firms and the legal industry. With its legal business dollars, the client community can

wield tremendous power in leading action to bring about such progress.

With that spirit in mind, this report focuses on action to support diversity legal business. It

summarizes programs from leading companies to incentivize and support usage of diverse

outside counsel. Where available, we also include concrete data to reflect the effectiveness of a

company’s efforts. Some of the corporate programs are remarkably innovative and ambitious.

Some are more detailed than others. Most overlap with the companies’ broader diversity goals

for their law departments, business, and the legal community. All of them are inspiring.

Our goal is not to suggest that any of these programs is the ideal approach or will work for every

company. Instead, we hope other corporate law departments will find ideas within these pages

that they too can implement. We hope law firms will explore further changes in their business

practices to better align themselves with client goals expressed in the programs. And we hope

this report will inspire even more new ideas for action.

Special thanks go to the law departments of the participating companies for working with me on

this report: AT&T; E.I. du Pont de Nemours and Company, Inc.; Gap Inc.; Microsoft Corporation;

PG&E; Sempra Energy; Wal‐Mart Stores, Inc. With their leadership and continued vigilance from

everyone in the legal community, we will continue to back up the dialogue with more action. . .

for diversity business matters.

Minority Law Firm Representatives

Maki Daijogo

Daijogo & Pedersen, LLP

Raul Salinas

AlvaradoSmith, APC

Michael A. Shimokaji

Shimokaji & Associates, P.C.

Public Agency Representatives

Rocio Fierro

Oakland City Attorney’s Office

Jimmy Nguyen

Davis Wright Tremaine LLP

2010 CMCP Co‐Chair

Diversity Matters.

Since 1989, Working for Diversity and Inclusion in California's Legal Profession

465 CALIFORNIA ST | SUITE 635 | SAN FRANCISCO, CA 94104

ph. 415-782-8990 | fax 415-477-2391 | cmcp@cmcp.org

www.cmcp.org


DIVERSITY BUSINESS MATTERS

Company

Page

AT&T 3

E.I. du Pont de Nemours and 8

Company, Inc.

Gap Inc. 17

Microsoft Corporation 25

Pacific Gas & Electric Company 46

Sempra Energy utilities 54

Wal-Mart Stores, Inc. 60

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AT&T Legal Department

A Top­Down Corporate Mission

At the corporate level, not just in its legal department, AT&T has a significant commitment

to diversity. AT&T’s Global Supplier Diversity Programs began in 1968 with the creation of

AT&T's Minority Business Enterprise (MBE) Program. In addition to the MBE Program, the

launch of AT&T's Women Business Enterprise (WBE) Program in 1980 and its Disabled

Veteran Business Enterprise (DVBE) Program in 1993 have better enabled us to provide

the best products and services to our customers by expanding contracting opportunities

for diverse businesses across its enterprise.

AT&T has achieved some of the highest supplier diversity spending results in the country.

AT&T increased its supplier diversity spending by nearly $2 billion from 2007 through

2009. In 2009, AT&T spent $6.9 billion with minority, women and disabled veterans

business enterprises (MWVBE), representing 14.2 percent of the company’s total

procurement. We have spent $50 billion dollars with these businesses since the Supplier

Diversity Programs began in 1968.

AT&T is a member of the Billion Dollar Roundtable, a supplier diversity think tank of

corporations that spends more than $1 billion annually with diverse companies. Only 17

companies qualify at this level.

The company's goal is to procure 21.5 percent of its total procurement from diversityowned

enterprises. Specifically, the company's diversity goals are:

• 15 percent with Minority Business Enterprises (MBE)

• 5 percent with Women Business Enterprises (WBE)

• 1.5 percent with Disabled Veteran Business Enterprises (DVBE)

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Legal Department Goals

The legal department has a 6.5% goal for using MWVBE law firms and other MWVBE legal

department vendors (e.g., e‐discovery vendors, audiovisual vendors for AT&T’s legal

conference). Even more impressive, the 6.5% number only reflects the law department’s

spending goal with MWVBE owned‐firms and vendors; it would not include the company’s

use of diverse lawyers at majority‐owned firms (which are not MWVBE certified). The

company’s law department strongly encourages law firms (majority and MWVBE) to staff

its matters with diverse attorneys. Thus, the total spending goal by AT&T that supports

diversity in the legal profession may exceed the 6.5% goal.

One reason for AT&T’s successful track record in diversity and inclusion is that it is not just

a legal‐department initiative, but is truly a tops‐down mission from the company’s CEO

which has the full commitment of the General Counsel.

Hiring and Use of Diverse Outside Counsel

AT&T’s law department encourages the hiring of diverse outside counsel in several

different ways:

(1) AT&T highlights the importance of diversity in its engagement letters and terms of

service with law firms. The company puts firms on notice that the firms need to push

diversity in their representation of AT&T. The company’s General Counsel reviews the

results on a regular basis, and corresponds directly with law firms who reflect the

company’s diversity values, and with those from whom AT&T would like to see do more.

(2) All law firms report their timekeeping and billing in a software platform that requests

specific information at the time‐keeper level. Firms are asked to report billable hours of

lawyers and paralegals who are racial minorities, women, LGBT and physically disabled.

This allows majority‐owned firms to provide AT&T meaningful data regarding their

internal diversification for the company’s matters. In addition, AT&T tracks its

expenditures with MWVBE law firms.

(3) Based on the data reported by firms in the billing software, AT&T tracks diversity

staffing of all matters.

• The company compares firms’ diversity metrics over time and with peer firms

• The company tracks the diversity of relationship partners and partners with

leadership roles on specific matters

• The company advises laws firms (550+ letters were mailed in June 2010) of

monitoring, accountability and improvement expectations, and recognizes those

with best performance

• This tracking activity is serving as a model for use with AT&T’s use of outside Public

Relations, Advertising and Accounting firms

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(4) Law firms that bill a certain threshold dollar amount annually are treated as a

relationship partner from whom AT&T requests an even greater diversity commitment.

Such firms are asked to show the company that dollars spent on AT&T’s behalf — e.g., for

contract services, court reporters, copying and reproduction — also go to support MWVBE

businesses.

(5) In the past, AT&T has also helped law firms get MWVBE certified, which allows them to

take advantage of other corporate initiatives.

Legal Department Diversity Program

More generally, AT&T’s legal department has a robust diversity program. While the

diversity program goals are broader than just providing business opportunities for diverse

outside counsel, they significantly overlap with the company’s efforts to partner with law

firms for mutual advantage.

1. Legal Diversity Committee

This committee was formally initiated in 2007 by AT&T’s General Counsel. The

committee engages attorneys throughout the nation to create and support pipeline,

mentoring, hiring and retention programs supporting diversity, including People of

Color, LGBT and the disabled. The committee further reviews and benchmarks

performance of law firm diversity through its billing system, considering performance

of majority‐owned firms and representation of minority‐owned firms.

2. Pipeline into the Legal Profession:

o Law school and high school intern programs

• AT&T hired about 20 law student summer interns for regional offices

during prior two years, with strong diversity representation. This

program has expanded continuously for over 4 years

• Several former interns were later offered positions with major law firms

representing AT&T

• AT&T partnered with an inner‐city private school with at risk students to

engage a high school intern at NJ legal offices as a clerk to offset high

school tuition at the school

o Job Shadow Program ‐ corporate program focusing on at risk high school

students

• all legal department employees are encouraged to participate

Partnered with a major firm to hire and train as a contract attorney a diverse law

school graduate who became an AT&T lawyer after 2 years.

Underwriting salary for a diverse law graduate who had been an AT&T summer

intern and who was employed by a major law firm but dedicates 80% of her time to

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AT&T matters. AT&T pays for senior attorney supervision and the firm has agreed

to cover her under its malpractice/indemnification policies. She is expected to join

AT&T legal in December 2010.

o Hosting fall program for students from two NJ local law schools to visit AT&T

office to learn about in‐house practice and career paths of in‐house lawyers;

pilot program for potential rollout at other legal offices

o

o

Volunteerism by AT&T attorneys to support high school moot court activities

Partnership and support of local and national bar association activities focused

on diversity and pipeline efforts

2. Pipeline into Law Firm Leadership.

Based on the billing data and tracking described above, AT&T tracks the diversity of the

relationship partner, partners with leadership roles on matters, and staffing at the law

firms used by the company. This helps AT&T influence the pipeline of diverse lawyers

moving into leadership positions at law firms.

3. Pipeline into Corporate Legal Leadership

o Diversity is a value factor for the department's leadership ‐ 40% of Officers are

Women, 33% of Senior Managers are Diverse

o Leadership development ‐ strategic development plans for advancement and

promotion opportunities for junior attorneys outside of AT&T

• Legal Clinics at SMU and other pro bono activities provide fertile training

for in‐house attorneys

o Mentorship Program and Leadership Training provided by the company’s

Talent Development and Chief Diversity Officer’s group for AT&T lawyers

o Diverse Candidate Pool – the company ensures each department opening has a

diverse candidate pool

• Promotions and Hires – diversity of workforce is a value factor

• Attorney Development Partnership – 2 entry‐level diverse attorneys

hired by the Company and trained by a partner law firm

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E. I. du Pont de Nemours and Company, Inc.

The following content is a compilation of materials about DuPont Legal and the DuPont

Legal Model.

It includes excerpts from "The New Reality: Turning Risk into Opportunity through the

DuPont Legal Model” – a book written and released by DuPont Legal. The book is a

resource for corporate legal departments look for a better way to work with outside

counsel -- and conversely, those law firms that serve corporate clients. The 90-page book

details the latest innovations of the renowned DuPont Legal Model, a partnering process

that increased efficiencies and saved the Company millions of dollars since its debut in

1992. The book is available for purchase online at:

http://www.dupontlegalmodel.com/the-new-reality/

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Valuing People – A Core Company Value

For more than three decades, DuPont has worked to achieve a diverse balance of race,

ethnicity and gender throughout the corporation. Like environmental stewardship and

safety, the Company has made valuing people of all backgrounds a core corporate value —

and has extended its commitment into every segment of its operation, from organizational

renewal to professional development.

Diversity at DuPont is defined through the corporate vision to be a “great global company

through people.” It is up to the corporate businesses, individuals, teams, groups and

managers to follow this principle and to shape diversity in ways that make sense for their

systems, processes and people.

Diversity and the DuPont Legal Model

Early into DuPont Legal’s partnering program, it was clear to the legal team that juries,

judges and policymakers were of increasingly diverse backgrounds. This trend impacts a

company’s ability to effectively connect with increasingly diverse segments of the legal and

business world and to reach them on intellectual, emotional and personal levels. So,

besides valuing people of all races, ethnicities and genders, diversity efforts were seen as a

critical component of the strategy for DuPont to compete globally in the 21st Century. In

addition, it was deemed vital to the law firms’ and suppliers’ efforts to remain competitive

in the legal market place.

When DuPont Legal undertook its convergence effort to select primary providers of legal

services, diversity objectives and accomplishments were top considerations. Primary Law

Firms (PLFs) and Service Providers were required to meet several criteria. Each

prospective firm and company was asked to demonstrate a commitment to forging a longterm

strategic business alliance, employing new technologies, using alternative fee

structures and — equally important — hiring, retaining and actively involving minorities

and women in the firm’s representation of DuPont.

Further, PLFs and Service Providers were evaluated based on their commitment to sharing

the overall corporate values of DuPont as well, so the diversity criterion was integral to the

new Legal Model and to the entire partnering program. It was also seen as providing a

competitive advantage to the corporation in the legal environment and beyond.

The core Legal Model criteria for selecting PLFs and Service Providers, including the

commitment to diversity, was not a one-time commitment. The commitment to diversity, a

DuPont core value, is on a continuing, active basis. It expects a commensurate commitment

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from its Network members. DuPont Legal has helped communicate the corporate values

for diversity and drive those values forward in its PLFs and Service Providers.

DuPont Legal encourages all its Network members to have diversity strategies that reflect a

genuine and proactive effort by the PLFs and Service Providers to achieve a diverse staff of

lawyers and other professionals who are actively involved in DuPont cases. DuPont Legal

evaluates PLF and Service Provider efforts to enhance diversity by reviewing their

responses to an annual evaluation called the Benchmark Survey. PLFs and Service

Providers are expected to reevaluate their diversity efforts on an annual basis to determine

if they still reflect the most effective and proactive strategies available and whether they

incorporate best practices used successfully by others.

Instead of imposing mandates and quotas on its Network members, DuPont Legal found

ways for the PLFs to take an active role in creating constructive solutions. A critical area in

need of improvement was minority recruitment at the law firms.

DuPont Legal/PLF Minority Job Fairs

To enhance outside firms’ recruitment efforts, DuPont Legal organized its first Minority Job

Fair in 1994. The fair presented students with an unmatched opportunity to meet

representatives from PLFs and Service Providers and to be interviewed for both summer

and permanent positions.

Today, the DuPont Legal Minority Job Fairs are an annual multi-city event, bringing in over

500 resumes from top minority law students and professionals around the country who

interview with DuPont PLFs and Service Providers. The fairs have resulted in many

summer and permanent employment placements in the PLFs and Service Providers.

Awards for the Diversity Initiatives of DuPont Legal

The National Association for Legal Placement (NALP) honored DuPont Legal for minority

lawyer recruitment with its Mark of Distinction Award, given in recognition of

organizations or individuals whose programs or practices effectively and ethically meet the

needs of participants in the process of legal employment. DuPont Legal was nominated for

contributing “to the NALP mission of providing leadership in areas related to career

planning and development, promoting diversity … and supporting professional education.”

In recognition of DuPont Legal’s many efforts to support diversity in the legal profession,

the Minority Corporate Counsel Association (MCCA) presented DuPont Legal with its

Diversity 2000 Award and named an award for law firms that show great commitment to

diversity after Senior Vice President and General Counsel, Thomas L Sager.

The National Association of Women Lawyers (NAWL) honored DuPont Legal with the 2008

NAWL President’s Award. NAWL gives this award to a company’s legal department that has

demonstrated a major commitment, through policies and practices, to advance women

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within the department and by aligning its outside law firms with the values of diversity

DuPont Legal was chosen to receive the award because it is seen as a trailblazer in this

regard, evidenced by a myriad of programs, benchmarking, enforced standards and metrics

that the department conducts.

Initiatives for Minority and Women-owned Law Firms

After many years working to support minority-owned law firms, DuPont noticed what

appeared to be a decline in the number of successful minority-owned firms. To explore this

issue, DuPont commissioned one of its Service Providers, Crosby Marketing

Communications, Inc., to undertake a “Study on the Status of Minority-owned Law Firms in

Today’s Legal Environment.” In the fall of 2004, based on the study, DuPont began

supporting new efforts to assist minority law firms to compete for major corporate legal

work. This effort resulted in the pledge by five Fortune 100 companies (including DuPont)

to place an aggregate of at least $16 million in business with minority-owned firms in 2006.

The five corporate legal departments surpassed this amount, and sent a total of $17.2

million to minority-owned firms in that year. The legal departments continue to support

minority-owned firms and encourage other corporate legal departments to join with them

in this effort.

Toward this goal, DuPont Legal led an initiative to develop an online tool to promote the

increased use of minority and women-owned law firms when outside counsel is needed.

The legal departments of these five leading corporations, DuPont, General Motors, Sara Lee

Corporation, Shell Oil Company and Wal-Mart, had rosters of minority and women-owned

firms to which they already sent legal work. However, many other corporate legal

departments are not aware of these firms or the solid legal work they are capable of

performing.

What resulted is a website – www.minorityandwomenlawfirms.com – that includes dozens

of minority and women-owned law firms across the U.S. employed by these five legal

departments and others. The site is designed to allow users to quickly and easily find a

minority or women-owned firm located in the state and legal practice area that may be

needed. The site has an interactive map of the U.S., the firms’ major practice areas and the

contact information to reach specific people in each firm.

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www.minorityandwomenlawfirms.com

The legal leaders of these corporations urge any and all in-house counsel to discover the

advantages, talent and value that these minority and women-owned firms have to offer.

DuPont Legal Street Law Diversity Pipeline Project

DuPont Legal’s commitment to diversity has led to the creation of diversity pipeline

projects aimed at encouraging and equipping minority students to enter the legal

profession. One of them, started in 2006, is known as the DuPont Legal Street Law

Diversity Pipeline Project. The Street Law program is conducted at Howard High School of

Technology in downtown Wilmington, Delaware. Howard High has a career track called

the Legal Administrative Assistant Program, and students in that track learn about the

basics of the law and administrative skills needed to work in a law firm, law department or

other legal-related organization.

DuPont has partnered with the Delaware Law Related Education Center (DELREC), and a

Delaware law firm, Young Conaway Stargatt and Taylor, to conduct this program. In

addition, Street Law, Inc., the national Street Law organization based in the Washington,

D.C. area, trained all of the volunteer legal professionals on how to conduct this pipeline

program, and Street Law continues to provide resources. DuPont is one of more than 30

corporate legal departments across the country conducting Street Law-designed pipeline

programs in their headquarter cities. Others include Marriott, Coca-Cola, McDonald’s,

Allstate, and Clorox to name a few. Interested parties can visit www.streetlaw.org, and

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look under the Corporate Legal Diversity Pipeline Program section for more information

and a list of participating companies.

The Street Law program is designed to send lawyers, paralegals and legal administrative

assistants from DuPont and Young Conaway into the classroom to teach the students basic

legal subjects. As part of the program, DuPont also puts on a one-day conference at its

headquarters. During the conference there is an interactive seminar for the students,

special guests and speakers such as local judges, the Wilmington City Council President, the

General Counsel of DuPont and the Dean of a Widener University School of Law, located in

Wilmington, Delaware. The conference ends with a career fair, which allows the students

to ask questions of lawyers, paralegals, legal secretaries, records clerks and IT

professionals to learn more about various jobs in the legal profession.

DuPont was the first of the corporate legal departments engaged in Street Law programs to

begin a mentoring component to its pipeline project. The juniors in the Legal

Administrative Assistant program at Howard High are provided with mentors – lawyers

and paralegals from DuPont and Young Conaway. The focus of the mentoring component is

to prepare the juniors for the college selection and application process, with the goal of

ensuring that students have the basic information needed to successfully gain admission to

college to further their careers.

In 2008, DuPont Legal began providing an SAT training class for the juniors in the program.

Widener University School of Law has also joined as a partner in this pipeline program.

The high school students have a special visit to the law school. This visit includes a mock

law class and paralegal training class, a tour of the law school, a lawyer and paralegal

student panel discussion, and an address by a dean of the law school.

DuPont Legal believes that if there is to be a sustainable and lasting improvement in the

representation of people of color in the legal profession, efforts must reach further back in

the pipeline, to high school and even middle school and elementary school students, to

ensure there is a pool of educated, informed and motivated minority candidates for the

future. The DuPont Legal Street Law Diversity Pipeline Project is one small but meaningful

contribution to that effort.

DuPont Women Lawyers Network

Another diversity initiative has been the creation of the DuPont Women Lawyers Network

(DWLN), which began in 2000. The Network’s mission is to positively impact the business

of DuPont by promoting legal excellence through the success, development and

professional advancement of the women lawyers representing DuPont and the women

professionals providing services to DuPont Legal. The women at DuPont Legal, its PLFs

and Service Providers have joined together to collectively network, market, mentor and

advance their careers. The Network conducts a multi-day annual conference in

Wilmington, which draws more than 200 women from the Network, as well as miniconferences

throughout the United States. The conferences and seminars of the Network

attract speakers of national renown from both the business and the legal worlds.

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The 2008 annual conference explored generational approaches to the workplace and

featured practice group and career development workshops, small group sessions with

General Counsel from other companies, and a presentation from Ellen Kullman, Chief

Executive Officer for DuPont, who was an early supporter of the Women’s Network and

spoke at the first DWLN conference. Other past conferences included panels of women

from the Network highlighting specific examples of successful collaboration,

The Network works continually on strengthening ties throughout the year. DWLN

members from across the country participate in periodic calls to discuss current issues and

articles.

DuPont Minority Counsel Network

Additionally, DuPont Legal and its PLFs and Service Providers have organized a Minority

Counsel Network (MCN) for attorneys of color. The MCN began in 1997 as an annual

conference that brought together all attorneys of color within the PLFs, Service Providers

and DuPont Legal to discuss critical solutions to the unique issues of recruitment,

mentoring and retention. The Minority Counsel Conference consists of a series of speakers

and panel discussions on topics related to advancing diversity efforts, professional and

leadership development, networking, substantive legal issues, marketing, and community

service, among others. From these annual conferences, the year round MCN was developed.

The initial goal of the conferences and now the MCN was to achieve a critical mass of

attorneys of color in-house and at the PLFs so their numbers would not be depleted by

natural attrition. The Network, through its conferences, newsletters and committee work,

provides an open exchange of shared learnings and promotes greater effectiveness of

diversity initiatives in the individual firms as well as DuPont Legal. The result has been

increased awareness of avenues for minority recruitment as well as increased hiring,

innovative long-range planning for recruitment, awareness of cultural barriers — both

professional and social — and the establishment of processes to break down those

barriers.

In June 2008, the MCN celebrated the tenth anniversary of the Minority Counsel Conference

at the Wilmington, Delaware headquarters of DuPont. More than 200 MCN members

gathered to commemorate this milestone, along with many MCN “alumni,” DuPont

corporate leaders, and in-house counsel from other corporate legal departments.

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MCN and DWLN Networking Database

In 2008, the MCN and the DWLN, launched an interactive internet-based networking

database. On the website, members of each network are able to create professional

profiles, post pictures and web links, and communicate and network with their colleagues.

The database enables MCN and DWLN members to locate colleagues for referral purposes

through searches by legal specialty, geographic location, schools attended, bar admission,

articles written, and many other search criteria.

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Impact of Diversity Initiatives

All these diversity initiatives have had a great impact on DuPont Legal and the Network

members:

• More attorneys of color and more women attorneys today are employed by the PLFs;

• A more diverse group of attorneys represents DuPont before judges and juries;

• A system has been developed to measure firm progress year over year, in order to

insure that more minorities participate in DuPont work; and

• Most, if not all, of the PLFs have active firm-wide diversity programs.

Going forward, the emphasis shifts to making lasting cultural changes so that successful

recruitment efforts are not short-circuited by turnover challenges. Successful professional

development, mentoring and advancement opportunities for minorities and women will

advance the diversity tenet of the Legal Model. Of late, attorney retention has become a

major challenge for our law firms, requiring increased focus on work-life issues.

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Gap Inc. established a formal approach to its law firm diversity strategy four years ago.

Every year since then, Gap Inc. has evolved its approach to match the Company’s legal

services model and emerging trends within the law firm diversity landscape. A key

component of Gap Inc.’s strategy has been the Gap Inc. Law Firm Diversity Survey (the

2009 version is included below). Gap Inc. requires each of its U.S. based firms to complete

its annual survey. In addition to the General Counsel having visibility to each response, the

documents are also stored on a shared drive for viewing by each attorney in the

Department at any time. Notably, Gap’s survey seeks significant detail, such as number of

diverse and female attorneys in the firms at all levels, including equity or non‐equity

partners and diversity on Gap Inc. matters. The survey also offers firms an opportunity to

talk about work they may be doing to solve pipeline or other complicating issues.

Gap Inc. considers its survey approach as evolutionary – and incorporates new learnings

and approaches each year. Industry data suggests that flexible work arrangements tend to

result in increased retention rates for attorneys of color and women. Accordingly, in 2010’s

end of year survey, Gap Inc. intends to inquire as to firms’ flexible work arrangements for

the first time. Upon receipt of law firm survey results, Gap Inc. has used this data to spark

dialogue with larger providers, to acknowledge the diversity successes of Gap Inc. law firms

that are on the leading edge, and to provide feedback and suggestions to any firms with

serious challenges.

As Gap Inc. enters into their third year of surveying law firms in this way, its experience has

been that law firms with whom it does business are responsive to completing the survey.

In those few instances where necessary, law firms do make changes needed to improve on

unacceptable statistics. Gap Inc’s approach with those firms has been first, to set our clear

expectation for improvement and the consequence of losing our business over time…and

then, to share resources or best practices to support their challenge. It’s a twist on the

proverbial “carrot and stick” approach! For example, one of Gap Inc.’s providers was a

small boutique firm located in a state with a proportionally large Hispanic population. The

firm, who had notably poor diversity numbers, joined the local Hispanic Bar Association

after a conversation with Gap Inc. in which the firm shared its “challenge” in finding diverse

talent. That same firm hired a Hispanic associate a year or so later. Based on this

experience, Gap Inc. favors the approach of working proactively with its law firms to

identify issues and brainstorm potential solutions.

Gap Inc. is exploring transitioning to a preferred provider model where U.S.‐based legal

work will be consolidated to a small number of law firms. Yet again, Gap Inc. will evolve its

law firm diversity strategy to accommodate this new reality. The law firm’s diversity track

record, and equally as important, the diversity of attorneys proposed to be assigned to the

Gap Inc. account are factors in selecting any preferred provider. The Company views the

consolidation process as an opportunity to have open dialogue and drive meaningful

change within those preferred law firms.

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Law Firm Diversity Profile

U.S. Attorneys Only

[Name of Firm]

[Contact]

[Phone Number]

FULL-TIME ASSOCIATES

Minority Men

Minority Women

White Men

White Women

Openly Gay or Lesbian

Total 0

PLEASE INPUT DATA ONLY WHERE HIGHLIGHTED IN YELLOW

(formulas will complete the rest)

OF COUNSEL

Minority Men

Minority Women

White Men

White Women

Openly Gay or Lesbian

Total 0

Minority Men

Minority

Women

WITHIN THE FIRM

White Men

White Women Gay & Lesbian

Total % Total % Total % Total % Total %

0 #### 0 ### 0 ### 0 #### 0 ###

NON-EQUITY PARTNERS

WITHIN THE RANKS

Minority Men

Minority Women

DIVERSE (not including white women)

White Men

Associates Counsel Partners

White Women

Total % Total % Total %

Openly Gay or Lesbian 0 #### 0 ### 0 ###

Total 0

EQUITY PARTNERS

Minority Men

Minority Women

White Men

White Women

Openly Gay or Lesbian

Total 0

WOMEN

Associates Counsel Partners

Total % Total % Total %

0 #### 0 ### 0 ###

TOTAL ATTORNEYS 0

19


SUPPLEMENTAL QUESTIONS

PART A

Firm Name: ___________________________________

(Please circle "Y" for yes or "N" for no)

1 Does your firm have an active diversity committee or council?

Y N

2 Does any partner act as diversity chair?

Y N

3 Does your firm participate in any diversity-related recruiting events? Y N

4 Does your firm have a diversity strategy, mission statement or

Y N

objectives?

5 Is your firm minority or women owned*?

Y N

6 Does your firm have a mentorship program?

Y N

7 Does your firm have diversity affinity groups?

Y N

*

A minority or women owned law firm is one that is owned, operated, managed and

controlled (51% or more) by minorities, women or LGBT.

20


SUPPLEMENTAL QUESTIONS

PART B

Firm Name: ___________________________________

For matters on which your firm billed Gap Inc. in 2009, please complete the information below for each attorney (based on selfidentification).

Please also provide the name of each attorney where indicated.

Origination,

Relationship or Billing

Partner (if applicable)

Male Female Caucasian

African-

American

Hispanic

American

Indian/

Alaskan

Asian-

Pacific

Islander

Openly

LGBT

Disabled

a. [INSERT NAME]

b. [INSERT NAME]

Partners

a. [INSERT NAME]

b. [INSERT NAME]

c. [INSERT NAME]

d. [INSERT NAME]

Non-partners

(associates, counsel,

etc.)

a. [INSERT NAME]

b. [INSERT NAME]

c. [INSERT NAME]

d. [INSERT NAME]

e. [INSERT NAME]

f. [INSERT NAME]

g. [INSERT NAME]

h. [INSERT NAME]

21


SUPPLEMENTAL QUESTIONS

PART C

(Only answer if your firm employs more than 100 attorneys in the U.S.)

Firm Name: ___________________________________

Please provide data on the total number of attorneys who left the

firm between September 1, 2008 and today.

ATTRITION (September 1, 2008 - present)

White men

Junior Associates

(Years 1-3)

Mid-Level and

Senior Associates

(Years 4+)

Income Partners

Equity Partners

Minority men

Total Men [sum of above] [sum of above] [sum of above] [sum of above]

White women

Minority women

Total Women [sum of above] [sum of above] [sum of above] [sum of above]

Openly LGBT

22


SUPPLEMENTAL QUESTIONS

PART D

Firm Name: ___________________________________

1. Identify the total number of minority and female partners in positions of leadership.

Number of

lawyers on

Executive/

Management

Committee or

equivalent

2007

2008

2009

Number of

lawyers that lead

offices

Total

number of

attorneys

Total

number of

U.S. offices

Minority

Male

Firm Leadership

Minority

Female White Male

White

Female

Openly

LGBT

Total

2007

2008

2009

Number of

lawyers that lead

practice groups

Total

number of

practice

groups

2007

2008

2009

2. Please describe any efforts your firm is taking, or plans to take, to further diversify the

constituency of the top leadership committees.

23


SUPPLEMENTAL QUESTIONS

PART E

HOW ARE YOU ENHANCING DIVERSITY IN THE LEGAL

PROFESSION?

Firm Name: ___________________________________

Is there anything else you would like to tell us about work your firm is doing, or plans to

do, to enhance diversity in your firm or the legal profession?

24


In September 2008, Microsoft Corporation launched an ambitious and innovative new Law

Firm Diversity Program that uses a “pay for performance” approach to promote increased

diversity in the legal profession.

Under the plan, Microsoft’s 17 Premier Preferred Provider (PPP) firms generally are

eligible for a rate increase on legal fees of up to three percent, but they can earn an

additional two percent bonus by achieving concrete diversity results. When it announced

the program, Microsoft stated that it expected to maintain the program in its current or a

similar form for a period of three to five years, after which it will evaluate what progress

has been made in addressing the concerns motivating the program.

What follows are the text from: (1) a memo from Microsoft General Bradford Smith which

announces and describes the Law Firm Diversity Program; (2) an Executive Summary of

Microsoft’s Law Firm Diversity Program; (3) a detailed Q+A document which answers

questions about the Law Firm Diversity Program for Microsoft’s participating law firms;

and (4) a description of the broader Diversity and Inclusion Program for Microsoft Legal

and Corporate Affairs.

25


To:

Microsoft’s Premier Preferred Provider Law Firms

From: Brad Smith

Date: September 17, 2008

Re:

Microsoft’s Law Firm Diversity Program

I’m writing to provide you with information about the final elections and the details

concerning the Law Firm Diversity Program for Microsoft’s Premier Preferred Provider

(PPP) law firms. This memo also includes and updates our prior information, so that you

have everything in one place. As described in detail below, under this program Microsoft is

changing its legal fee structure so that each PPP firm is eligible for a two percent quarterly

or annual bonus based on whether it achieves concrete diversity results. Given the

substantial business value we derive when law firms that work with us strengthen

diversity and address the historical imbalance in representation of women and minorities

at major law firms, we believe this is an important and appropriate step.

We wanted to give you a summary of the PPP elections. First, we are pleased and honored

to announce that all PPP firms have elected to participate in the program. In addition, your

elections broke out as follows: nine firms elected the .5 percent firm composition formula,

and eight firms elected the formula based on the 2 percent billable hour formula. (The

specifics of the two formulas are outlined below.) Also of note, 11 firms chose to seek the

bonus based on an annual measurement, while six firms selected the quarterly

measurements.

This letter provides information on both the context for this diversity initiative and the

substance of our final plan for our fiscal year 2009 (FY09), which started on July 1. You will

also find attached a Q & A that covers the detailed mechanics for this program. Again, I’d

like to convey our thanks to each of you for continuing to provide candid feedback as we

design and implement the program. After further discussions and questions looking to

clarify certain points, we have made slight revisions to the program documents we sent on

July 14th. This revised memorandum and the accompanying documentation will govern

the program.

1. The Context Guiding Our Thinking

I think it’s helpful first to frame our plan by providing some background on our thinking.

This will give you a better sense of what we’re trying to accomplish and why. Overall our

plan reflects and is grounded in three core convictions.

Business Necessity. First and foremost, we believe that diversity in our legal teams is a

business necessity. We believe that we best serve Microsoft through a highly talented,

committed, diverse, and collegial group of legal specialists, working as part of effective

teams. The reality is that we cannot be effective if we cannot understand and appreciate

26


the interests and needs of the incredibly diverse individuals who make up our stakeholder

groups, from employees and customers to business partners, regulators, and judges.

Microsoft has subsidiaries in over 110 countries. We have employees in Redmond alone

from over 130 countries. Our employees, customers, and other stakeholders represent

every background in the country and on the planet.

Microsoft needs a legal and corporate affairs team that better reflects the diversity of these

groups. Otherwise I believe we’ll fall short. We’ll fail to appreciate fully how other people

are thinking about us and the legal questions at issue. And as we’ve learned from

experience, sometimes even painfully, if we cannot understand how other people are

thinking, there’s a greater likelihood that we’ll fail to address their needs or persuade them

of our position. In this sense, diversity is not simply something that would be nice for us to

have; it’s a prerequisite for our success.

Slow Progress. Second, we believe that despite good intentions, the legal profession has

not yet achieved impressive results in expanding diversity that fully reflects equal

opportunity for the available pool of qualified talent. This lack of success hinders our

ability to call on the full diversity of professionals we need.

We do not believe that the relative lack of progress in the profession results from an

absence of good intentions and initiatives by major firms. Virtually every major law firm in

the country has leaders who we believe are personally committed to expanding the

diversity of their firms. Increasingly one also finds firms pursuing various initiatives of

which they are justifiably proud. But collectively these efforts have not yet produced

results that are commensurate with the diverse talent graduating from law schools. Only

18 percent of the partners at the nation’s large law firms are women. Only 5.4 percent of

partners at large firms are minorities. Of course progress takes time. But the pace of

progress needs to accelerate.

Working in the information technology industry, we’ve seen over the years a number of

business initiatives in which good intentions and lots of hard work don’t necessarily

translate into successful business results. To a considerable degree this reflects the nature

of a rapidly‐changing industry that requires long‐term innovation and big bets. We’ve had

the opportunity to learn from these experiences about the recipe for long‐term success.

Certainly one doesn’t give up. But changes in approach are sometimes required.

Part of what we’ve learned is that goals need to be measurable — not as quotas, but as

indicators of the extent and direction of progress that is being made. In the context of legal

diversity, for example, we believe that there needs to be a more consistent and stable set of

metrics against which results can be compared. New initiatives and supporting activities

need to be launched, but one cannot confuse efforts with outcomes. The short‐ and longterm

success of these activities needs to be assessed by evaluating whether they are

achieving the desired results. When it comes to challenging goals, almost all progress is

27


incremental. But progress in producing results needs to be both real and sustained in

measurable terms.

We’ve also found that the best form of learning comes from doing. This is not to

underestimate the importance of being thoughtful in advance. But in most circumstances

one can learn more quickly by experimenting with new initiatives than simply by debating

their merits. This requires a willingness to invest resources and try new things, coupled

with disciplined, self‐critical evaluation to learn and change based on what is succeeding

and what is not. One needs to be bold and take some risks.

We’ve also learned that economics really do matter. If one can define clear and measurable

goals and pay for performance, there is a higher likelihood of producing real results. This is

one reason the equity compensation of senior leaders inside our company has been based

in part on improving the satisfaction ratings of our customers. When it comes to advancing

diversity, however, our profession is not yet embracing the “pay for performance”

approach that successfully guides so much activity in our economy.

Finally, one needs accountability that works. The ultimate form of accountability in

business is of course the risk that one will lose one’s job, or in this case, lose a client. But in

many circumstances, this may not represent the right result, especially if the individuals

(or law firm) involved are good and strong and have the potential to do better. This is not

to take the risk of firing out of the equation. Rather, we believe that this can be coupled

with a more measured approach that includes important but more incremental risks and

rewards.

We’re in This Together. Third, we believe that legal departments and law firms need to

advance diversity by working in closer partnership. We’ve been giving this aspect of the

dynamic particular thought, and we very much appreciate the suggestions that you

provided to us. As we continue to work together over the years to come, we hope that

you’ll provide even more.

On the one hand, corporate legal departments are of course the client when it comes to

working with large law firms. We believe it’s appropriate and necessary for us to be clear

about what we want and why. But we also need to do more together. Ultimately we both

depend on the same pipeline of new talent from law schools. We both depend on the

development of new associates, even if we do so in different ways. We work on specific

matters not just as individuals in separate institutions but collectively as part of a common

team. To a huge degree we have common needs. We believe there’s an opportunity for us

to be more successful if we address them together.

We also believe that we should not ask those who work for us to commit to something

unless we’re prepared to make a similar commitment ourselves. When it comes to data

about diversity, corporate legal departments can do more to commit to the type of

transparency they’re asking of law firms. We’re prepared to share with you information

28


about ourselves in the same way that we’re asking you to share information with us.

Similarly, if we’re going to incorporate diversity into the way we pay for performance for

law firms, we need to be prepared to take the same type of step for the compensation of

senior management inside our department. We are.

During the last decade the nation’s law firms and large corporate legal departments have

grown considerably in size. As a profession we’ve taken important strides to promote

diversity with initiatives such as the Call to Action. The recent April meeting of law firm

leaders and legal department leaders in Phoenix has created an important opportunity to

build on the Call to Action and take it farther, and we are committed to supporting that

effort. A number of other individuals, companies, and associations are spearheading

important diversity steps, and we have both learned and benefited from their trail‐blazing

efforts. More than anything, we believe we have an opportunity to achieve more effective

results if we can find new ways to work together. This is an important part of what we

hope to accomplish with you.

2. Microsoft’s Law Firm Diversity Program

Our Law Firm Diversity Program has three pieces: (1) new diversity incentives for our PPP

law firms; (2) a new and similar commitment by our department, including to partner

together with PPP firms to increase diversity in both our organizations and the legal

industry as a whole; and (3) a process to assess our progress a year from now to learn from

our experience and decide on improvements for the future. We expect to maintain the

program in its current form, or something close to this form, for a period of three to five

years, after which we will evaluate what progress has been made in addressing the

concerns motivating the program.

Law Firm Diversity Program. As you know, in early May I sent a letter to all of the law

firms working with Microsoft to explain that we would not pay rate increases in excess of

four percent for the new fiscal year that began on July 1. We are also creating a diversity

incentive bonus for our PPP firms. Under this plan, our PPP firms are eligible for a rate

increase on legal fees of up to three percent, but they can earn an additional two percent

bonus by achieving concrete diversity results.

We have created two alternative formulas to measure diversity progress, and each PPP

firm can choose which formula it wishes to use. Based on the election you have already

made, your firm will need to stick with the same formula for the entire fiscal year.


The first formula will pay the two percent bonus if the firm achieves in the U.S. a two

percentage point increase in the hours worked by diverse attorneys as a percentage

of total attorney hours worked on Microsoft matters, compared to the same time

period in the preceding year.

29


The second formula will pay the two percent bonus if the firm achieves a .5

percentage point increase in total diverse attorneys as a percentage of the firm’s

total attorneys in the U.S., compared to the same time period in the preceding year.

In other words, the first formula focuses on diverse representation in hours worked for

Microsoft, while the second focuses on diverse representation in the firm’s U.S. offices,

taken as a whole.

In both cases the definition of diverse attorneys includes women and minorities, including

attorneys who are Black/African American, Latino/Hispanic, Asian, Native Hawaiian/Other

Pacific Islander, American Indian/Alaska Native, or of mixed race. This includes diverse

attorneys who are partners, associates, of counsel, and in any other permanent attorney

category, but excludes “contract” attorneys. In addition, we strongly encourage firms to

include Openly Gay, Lesbian or BiSexual attorneys in their definition of diverse attorneys.

We recognize, however, that it may not be legally permissible in some states to require

disclosure of or track this latter group. We therefore will honor whatever approach your

firm decides to take with respect to this particular aspect, and we will look to you to let us

know if you include Openly Gay, Lesbian or BiSexual attorneys in your firm’s definition. We

also will consider including additional aspects of diversity in this definition as we gain

experience with this initiative.

Even if a firm selects the second formula relating to firm composition as a whole, we

strongly encourage you to increase diverse attorney representation on Microsoft matters,

given the importance of this to our business.

Regardless of which formula your firm chooses, we will, of course, continue to welcome

participation of non‐diverse attorneys in legal work done for Microsoft; and we expect that

your initiatives to increase diversity will be implemented in a manner that is consistent

with all applicable anti‐discrimination laws.

As a number of you have requested, the final program allows firms to opt for bonus

eligibility on either a quarterly or annual basis. In either case your results must be

reported within 45 days of the close of the relevant time period. If you select the annual

bonus, we would also like to implement a mid‐year check point so we can consult together

on how things are going, especially if you are using the formula based on diverse

representation of attorneys working on Microsoft matters. All firms must use the attached

reporting template when submitting their form.

We will preserve the confidentiality of each firm’s information and will not disclose

publicly or to any other firm either the numeric data or the news of whether any individual

firm has earned the bonus. We would like, however, to be in a position to share publicly at

the end of our fiscal year the aggregated information about what percentage of all of our

premier firms earned the bonus. By way of context, there currently are 17 law firms that

are PPP firms for Microsoft.

30


I’d also like to share additional information about the rationale for some of the foregoing

elements of this plan. First, we were persuaded by your feedback that it makes the most

sense to cap the base rate increase at three percent while providing the ability to earn a

bonus of an additional two percent. In effect, this creates a risk/reward factor for each

firm. If a firm fails to make progress on diversity, it will have a lower rate increase than

firms that are not in the PPP category. But if a firm does earn the bonus, it will obviously

earn a bigger increase than these other firms. This seems equitable to us.

Second, we were persuaded by your feedback that it makes sense to adopt a formula based

on year‐over‐year progress rather than on out‐performing a national average. Although

you were not unanimous on this point, an overwhelming majority suggested that this gives

everyone a comparable incentive and opportunity to earn the bonus. We were also

persuaded that different firms might have sound bases to choose one formula over another,

and hence we’d like to incorporate this flexibility for you.

We do appreciate, as a number of you suggested, that there may come a time when a firm’s

absolute progress in strengthening diversity will be so great that it should receive a bonus

regardless of whether it makes additional progress compared to the prior year. We agree

with you, and we look forward to that day. This suggestion also fits with our expectation

that the Law Firm Diversity Program is an approach that will be reexamined over time.

Having surveyed the current situation, we do not believe that any of our PPP firms are yet

in a position in which we are comfortable providing for this bonus without additional

progress. We will, however, continue to consider whether there is a particular milestone

that should be established for such circumstances. If so, this will be incorporated into

future versions or modifications of the program.

We recognize that there are certain unknowns inherent in launching something like this.

Almost certainly we will make changes over time. In part these changes will reflect

experience and new learning. (This in part is why we are requesting that you report results

under both formulas even though your bonus will be based only on one.) In part it also may

reflect changes in the diversity situation for our profession over time. For this reason, the

ability to have an ongoing assessment and dialogue with you will be critical.

Diversity Commitment by Our Department. We are coupling the Law Firm Diversity

Program with a substantially broadened diversity initiative for LCA that includes a number

of concrete steps. Some of these are directly related to your work, so let me start with

these.

First, we welcome the opportunity to work together on programs to help attract and retain

a broad, talented, and diverse group of attorneys at your firm. The following steps to

support attorney recruiting and development at your firms have emerged already, and we

are hoping that you may have additional ideas:

31


On August 6th we hosted for our Seattle premier firms a “Summer Associate at

Microsoft Day.” As you know, we used this day to introduce interested summer

associates to the cutting edge technologies and legal issues that Microsoft faces and

that our premier firms, in particular, help us address. Attendance was great, and

initial feedback suggests that with some minor modifications, we will continue to

hold this program for our Seattle firms.

We’re considering expanding Microsoft’s own summer legal intern program, which

is for students who have completed their first year of law school, to recruit

additional candidates from additional Historically Black/Latino law schools beyond

the ones we’ve recruited from to date. As is the case for our existing program, we

would work with these candidates and all of our other summer interns for the first

summer here in Redmond. This summer we offered all our premier firms the

opportunity to interview our interns on the Microsoft campus on August 4th. Initial

indications are that we will continue to offer this option in future years.

We were an original sponsor of the MCCA Lloyd M. Johnson Scholarship program,

funding three students a year for the last three years and recently agreeing to

continue that funding level for the next three years. A number of our first year

summer interns in LCA have come to us through the MCCA program. We have

stayed in touch with those students (who are very impressive) and would welcome

the opportunity to have any law firm meet them to consider further opportunities.

Several years ago we founded and have since continued to lead and create

sponsorships for the Microsoft Women and Minority Law Student IP Summit. This

Summit is a meeting of law students, law firms, and interested in‐house counsel

designed to encourage women and minority law students to seek careers that focus

on technology/IP related issues. We will host our fifth event October 6 in Chicago.

A number of our premier firms have participated with us, and we appreciate that.

Winston and Strawn has already offered to support the Summit as a Premier

Sponsor. If any firm is interested in participating in Chicago or learning more,

please contact Joe Lee at joelee@microsoft.com.

Last year the Seattle office of Davis Wright Tremaine approached us about crossorganizational

mentoring opportunities. We are pleased to be working with them

on a program in which LCA attorneys will mentor some of their diverse associates.

The program is designed to foster a stronger professional community for DWT

associates, and we are excited to be asked by DWT to partner with them in this way.

If other firms have an interest or a similar idea, we would be happy to explore it.

During FY 09, we will organize an Advocacy Academy focused on diverse counsel at

our PPP law firms, similar to the Advocacy Academies our Litigation Practice Group

has conducted in the past. Our focus in FY 09 will be on providing diverse senior

associates and junior partners the opportunity to work with a blue ribbon group of

32


trial lawyers and former judges, along with jury, communications, and other

consultants. As with our prior sessions, the participants will have the opportunity

to hone their trial skills. Among other benefits, this will help us get to know and

work with diverse lawyers who we can then call upon for leading roles in future

cases.

We hope that you will provide us with ideas for additional, creative steps that we might

take together. We have increased our diversity project budget from $250,000 last year to

$750,000 for the current fiscal year to ensure that we can take more initiatives.

Second, we recognize the importance of aligning activities and interests in expanding

diversity at our premier firms. For this purpose, in addition to deciding that two percent of

your firm’s fees from Microsoft will be based on diversity progress, we have decided that

five percent of the annual bonus paid to our most senior departmental leaders similarly

will be based on law firm diversity progress.

Specifically, as some of you have mentioned in providing us feedback, you cannot always

make progress by yourself to increase the representation of diverse attorneys working on

our matters. Microsoft’s legal teams need to be supportive of this effort, given their

frequent involvement in signing off on law firm staffing decisions for particular Microsoft

matters.

To help encourage this mutual effort, we are adopting for FY09 a new bonus formula for

the members of the LCA Management Team (me and my 12 direct reports), plus the head of

our diversity efforts. This formula will pay next August the final five percent of each

individual’s annual bonus only if there has been strong progress over the course of the

fiscal year among those premier firms that are relying upon the diversity formula based on

achieving a two percentage point improvement in diverse representation on our matters.

Let me describe how we will measure our own success: Next August we’ll look back at the

fiscal year. We’ll add up the total number of PPP firms that selected this diversity formula

and calculate how frequently these firms collectively earned their quarterly or annual

bonus. If and only if all of these firms collectively earned this bonus at least 75 percent of

the time, then our senior people will receive this final five percent of their annual bonus.

This ensures that we’re all working on the same basis and share a common interest in

helping each other succeed.

To further encourage success we will assign a senior leader within LCA who will work with

each participating firm to ensure good communication and provide a single point of contact

to help support both the firm’s and Microsoft’s goals with this program. We expect that

regular meetings and other opportunities to work across organizations will result from this

approach.

Finally, I would note that our work with PPP firms is an important piece of our broader

diversity work in FY09. In addition to the work with law firms, we’re focused on three

33


other measurable goals for ourselves for the fiscal year – increasing the percentage of legal

fees we spend on women and minority business enterprise (WMBE) firms by .5 percentage

points; increasing diverse representation of women worldwide at more senior levels within

LCA by 1 percentage point; and increasing diverse representation of minorities in the U.S.

at all levels by .5 percentage points. We will pursue a wide variety of activities to help

achieve these goals. Just as we’re asking you to share information on your progress, we’re

prepared to share with you information about our progress and what we’re learning in

terms of various activities and the results they’re producing. We would welcome the

opportunity to discuss and share best practices with you, in the hope that we can learn

from each other.

Assessing Ongoing Progress and Adapting for the Future. As I’ve mentioned, we’ll have

a formal process that will include input from you next spring to evaluate the first year of

this new effort. We propose to share with you the collective data about how the law firms

have done overall, while not disclosing any information about any individual firm either

publicly or to any other firm. We will solicit feedback from you and from our own lawyers

on the experience. We’d then propose to sit down with you either before or at next year’s

LCA Summit to talk about how this effort can be changed and strengthened for the future.

* * *

In closing, I’d like to thank you once again for working with us to develop this new

initiative. I especially appreciate all the candid and direct feedback that so many of you

have provided. We’re excited about the opportunity to continue to improve our Law Firm

Diversity Program. Moving forward, we hope that together we will develop and pursue

new and creative ways to advance diversity for us all.

Bradford L. Smith

General Counsel

Microsoft Corporation

34


September 17, 2008

Microsoft’s New Law Firm Diversity Program:

Executive Summary

Microsoft’s Law Firm Diversity Program is a new initiative that uses a “pay for

performance” approach to promote increased diversity in the legal profession.

We launched this initiative because we believe diversity in our legal teams is a business

necessity. We cannot be effective if we cannot understand and appreciate the interests and

needs of the incredibly diverse individuals who make up our stakeholder groups. This is

important both for our own department and for the law firms on which we rely. We also

recognize a historical imbalance has existed for diverse lawyers at most major law firms,

particularly at the senior levels. This program is designed with this imbalance in mind.

We were inspired by many other individuals and groups who are taking important strides

to advance diversity. Yet despite their hard work, there’s still a lot of room to progress. We

concluded that it was important for us to add to their initiatives by becoming more

proactive ourselves.

Under this plan, our 17 Premier Preferred Provider (PPP) firms generally are eligible this

year for a rate increase on legal fees of up to three percent, but they can earn an additional

two percent bonus by achieving concrete diversity results. We expect to maintain this

program in its current or a similar form for a period of three to five years, after which we

will evaluate what progress has been made in addressing the concerns motivating the

program.

We are creating two alternative formulas to measure diversity progress, and each PPP firm

can choose the formula it wishes to use.


The first formula will pay the two percent bonus if the firm achieves in the U.S. a two

percentage point increase in the hours worked by diverse attorneys as a percentage

of total attorney hours worked on Microsoft matters, compared to the same time

period in the preceding year.

The second formula will pay the two percent bonus if the firm achieves a .5

percentage point increase in total diverse attorneys as a percentage of the firm’s

total attorneys in the U.S., compared to the same time period in the preceding year.

Because we recognize the importance of aligning our own activities with the goals we are

asking others to achieve, we also are adopting for our new fiscal year a new bonus formula

for Microsoft’s most senior inside attorneys – including myself. For these LCA leaders, five

percent of our annual bonuses will depend on the level of success our PPP firms achieve

improving diversity and earning their bonus from us. This ensures that we’re all working

on the same basis and share a common interest in helping each other succeed.

35


We are also focused on three other measurable goals for ourselves for the fiscal year –

increasing the percentage of legal fees we spend on women and minority business

enterprise (WMBE) firms by .5 percentage points; increasing diverse representation of

women worldwide at the more senior levels within our department by 1 percentage point;

and increasing diverse representation of minorities in the U.S. at all levels by .5 percentage

points. We will pursue a wide variety of activities to help achieve these goals.

We know that we at Microsoft don’t have all the answers, and we fully expect this program

may change in coming years as we gain experience and gather feedback. But we believe

that in business the best form of learning often comes from doing.

We welcome your thoughts and look forward to working with you to make this program a

success.

Bradford L. Smith

General Counsel

Microsoft Corporation

36


September 17, 2008

Microsoft Law Firm Diversity Program

Detailed Q&A for Participating Law Firms

Q: What are the formulas that will be used for the Law Firm Diversity Program?

A: The first formula will pay the two percent bonus if the firm achieves in the United States

a two percentage point increase in the hours worked by diverse attorneys as a percentage

of total attorney hours worked on Microsoft matters, compared to the same time period in

the preceding year. Fixed fees and contingency fees are included in the total fees upon

which the 2 percent bonus is to be paid.

The second formula will pay the two percent bonus on total fees if the firm achieves a .5

percentage point increase in total diverse attorneys as a percentage of the firm’s total

attorneys in the U.S., compared to the same period in the preceding year.

Under both formulas, fixed fees and contingency fees are included in the total fees upon

which the 2 percent bonus is to be paid.

Q: Do Microsoft’s Premier Preferred Provider (PPP) law firms have a choice about

whether to participate in the diversity incentive program?

A: This is a voluntary program. Separate from this bonus, all PPP law firms will be eligible

for a maximum rate increase of 3 percent on their legal fees from Microsoft in fiscal year

2009 (FY09), regardless of whether they choose to participate or successfully achieve one

of the diversity metrics. Firms that take part in the diversity program will have the

opportunity to receive an additional 2 percent quarterly or annual bonus if they achieve

certain progress in diversity. In other words, firms that choose to participate can achieve a

total rate increase of 5 percent if they earn this bonus.

This compares to the maximum rate increase of 4 percent for the non‐premier law firms

working with Microsoft.

Q: Is there a distinction between full and part­time attorneys?

A: All associates, partners, and of counsel or those with similar status should be included

in the calculation for purposes of these metrics, whether working full or part‐time.

Attorneys that are not employees of the firm, such as independent contractors or “staff” or

“contract” attorneys, should not be included.

37


Q: Are all timekeepers (paralegals, admins, etc.) included in the calculation?

A: No, only attorney timekeepers should be included in the calculation.

Q: What categories of diversity are included in the program?

A: Only U.S. attorneys in the following categories should be included in the quarterly or

annual reporting.

Racial Minority: Black/African American, Latino/Hispanic,

Asian, Native Hawaiian/Other Pacific Islander, American

Indian/Alaska Native, or Multi‐Racial.

Gender: Female.

Sexual Orientation: Openly Gay, Lesbian or BiSexual

(inclusion of openly gay, lesbian or bisexual attorneys in your

calculations is optional per your firm’s internal policies/legal

obligations).

The first two categories must be included. We encourage firms to include the third

category as well, although we are not making it mandatory at this time, since it may not be

legally permissible in some states to require disclosure of or track this latter group.

In future years, we will consider including additional aspects of diversity in this definition.

Because the program is only in its first year, we are taking a more focused approach.

Q: How do we account for people falling into one or more classes?

A: Please note that each attorney should only be represented once in your calculations.

For example, do not “triple count” the contributions of a Black/African American, Lesbian

woman to your firm’s performance by including her hours worked or representation in the

race, gender and sexual orientation categories.

Q: Does Microsoft envision a point in time in the future when a firm can be so

successful with its diversity efforts that it need not take any action to receive this

bonus under this program?

A: We do appreciate that there may come a time when a firm’s absolute progress in

strengthening diversity will be so great that it should receive this bonus regardless of

whether it makes additional progress compared to the prior year. We look forward to that

day. We expect to maintain this program in its current or a similar form for three to five

years, after which we will evaluate what progress has been made in addressing the

38


concerns motivating the program. Having surveyed the current situation, we do not

believe that any of our PPP firms are yet in a position in which we are comfortable

providing for this bonus without additional progress. We will, however, continue to

consider whether there is a particular milestone that should be established for such

circumstances.

Q: When do I have to select which formula and frequency I want to use as part of the

program?

A: Firms are required to indicate both the formula and frequency they want to use no later

than August 15 if they want to be eligible for the program. Regardless of which formula the

firms choose, we are asking firms to report information using both diversity calculations so

we may use the information to consider future changes to the program.

Q: Are attorneys in all of our offices worldwide included as part of the calculations?

A: No, only appropriate timekeepers from U.S. offices should be included in the calculation.

In future years we may expand this to include women in offices outside the U.S.

Q: Do we need to calculate metrics for specific matters or offices?

A: No, the firm need not calculate metrics for specific matters, departments or offices.

These calculations should be made on all billable hours from the appropriate timekeepers

in all U.S. locations.

Q: Do we need to report the various categories of diversity?

A: For the purposes of reporting, you need only report two (three if you elect to include

GLBT) categories of diversity, gender and race, making sure that time keepers are not

double or triple counted across those categories. Within race, you do not need to

distinguish between different categories of race for reporting purposes. However, we do

ask that if you can, that you voluntarily share with us a breakdown among the various

categories of race and sexual orientation.

Q: Do we need to identify individuals in our reports?

A: We do not require firms to name diverse individuals as part of the reporting. However,

if the firms and the individuals voluntarily agree to do so, we would appreciate the firms

providing us with the names of the diverse attorneys that work on our matters so that we

may foster deeper relationships with these professionals.

39


Q: What is the reporting frequency?

A: If a firm chooses the quarterly option for either metric, then firm must report within 45

days of the end of each quarter. If a firm chooses the annual option for either metric, then

the firm will must report within 45 days of the end of Microsoft’s fiscal year (June 30th),

with an informal check in at midyear to make sure the firm is on track.

If the firm chooses the metric based on attorney composition for the firm as a whole, it

should report data for the last day of the reporting period and for the same date one year

ago.

Q: When and how are bonuses paid?

A: Thirty days after receipt of the firm’s periodic reports, Microsoft will pay qualifying

firms the bonus using the payment mechanics that are used as part of our preferred

provider program.

Q: When calculating bonuses, will the bonus be paid only on the hours of the

appropriate timekeepers that are used for the metrics?

A: No, Microsoft will pay the bonus on all fees – hourly, contingent or fixed – that a firm

invoices Microsoft during the relevant reporting period.

Q: For the purposes of calculations for the formula based on diverse representation

on Microsoft matters, how are hours to be measured for fixed fee or contingent

matters?

A: For any matters that Microsoft has arranged a fixed or contingent fee approach, the firm

should faithfully keep track of hours worked, which will be used solely for the purposes of

calculating whether the firm achieves the 2 percent bonus.

Q: Is Microsoft going to publicly disclose the diversity data it receives every quarter

from its premier partner law firms?

A: We will preserve the confidentiality of each firm’s information and will not disclose

publicly or to any other firm either the numeric data or the news of whether any individual

firm has earned the bonus. We may, however, share publicly at the end of our fiscal year

the aggregated information about what percentage of all of our premier firms earned the

bonus in a particular reporting period.

40


Q: Is this a one­year experiment for Microsoft, or do you intend to keep the program

in place?

A: We are approaching this from the perspective that this is a three to five year initiative

and almost certainly we will make changes over time. In part these changes will reflect

experience and new learning. (This in part is why we are asking our partner firms to

regularly report results – either quarterly or semi‐annually for those opting for the annual

calculation – under both formulas even though their bonus will be based only on one.)

Future changes in the program may also reflect changes in the diversity situation for our

profession over time. For these reasons, the ability to have an ongoing assessment and

dialogue with our partners will be critical.

41


Microsoft Legal and Corporate Affairs

Diversity and Inclusion Program

“We believe diversity enriches our performance and products, the communities in which we live

and work, and the lives of our employees. We recognize diversity as a core value, business

imperative and an investment in our people.” ‐‐Brad Smith, SVP and General Counsel

This document summarizes LCA’s diversity and inclusion program, including its goals and

scorecard, organization, and programmatic focus. Over the last few years LCA has been

recognized by a number of professional organizations as an important voice in the

promotion of diversity in the legal profession. The department’s Law Firm Diversity

Program, which includes financial incentives and accountability for both major law firms

and LCA’s senior leaders and is described below, has drawn particular national attention

since its launch in the summer of 2008.

Brad Smith has identified the following guiding principles for our diversity and inclusion

strategy: 1. Measurable Goals, 2. Transparency, 3. Strategic Focus, 4. Accountability,

5. Collaboration.

LCA Diversity Goals and Scorecard

We use fiscal year planning and MYR exercises to define and assess our strategic approach

in the diversity area. Every member of the LCA SLT has a diversity accountability on their

own commitment sheet, based on the overall LCA scorecard goals.

For the last six years LCA has focused more systematically and programmatically on

increasing diversity and inclusion across the department. The department’s goal is to

increase and develop diverse representation internally, encourage diversity among the

department’s vendors, and promote a more inclusive work environment that leverages

different points of view.

Similar to other departments at Microsoft, LCA uses a number of metrics to measure its

diversity and inclusion work. On a quarterly basis, LCA calculates a composite diversity

metric. This metric is included as one of the 25 elements on the department‐wide

scorecard. The metric consists of four items, two of which are internal and two of which are

external.

42


The four items are:

Internal

(Each internal metric weighted

equally against the other)

External

(Each external metric weighted

equally against the other)

% of women in more senior experience

levels vs. all LCA employees worldwide of

the same experience levels

% of US minorities vs. all US LCA employees

% of US outside counsel work performed by

Women and Minority Owned Enterprises

(WMBE)

% of Premier Preferred Provider law firms

meeting Law Firm Diversity Program goals

Microsoft Law Firm Diversity Program

Launched in FY09 to encourage key outside counsel to increase the diversity in their firms

through a strategy of “pay for performance” and collaboration.

A firm earns the last 2% of its legal fees as a bonus by achieving a YOY increase of 2% in

hours worked by diverse attorneys on Microsoft matters, or a .5% increase in the

diversity of their attorney workforce, or matching the diversity of LCA’s U.S. attorney

workforce, which for FY11 is 52.4%.

The program parameters and criteria are developed in partnership with law firm

participants, with each held accountable for results. Brad Smith, the SLT, and LCA’s

Diversity Lead have tied 5% of their bonuses to at least 70% of law firms meeting their

diversity goals under the program in FY11.

In the first year of the program the success benchmark was just missed and the

forfeited SLT bonuses were donated to support college scholarships for low‐income

students. In the second year just concluded, the success benchmark was achieved.

LCA supports firms in their diversity efforts through programs like Summer Associate

Day, and the Davis Wright Tremaine Pilot Mentor Program, where senior LCA

attorneys are partnered with junior associates from a law firm in a 1:1 mentoring

relationship.

LCA Diversity Team

Since 2005 LCA has leveraged an organized Diversity Team to inform and execute diversity

and inclusion initiatives across the department.

The Diversity Team has more than 60 people driving diversity‐related programs and

events in FY11 in four major activity areas: Pipeline Programs, Employee

Development and Retention Initiatives, Outreach and Recruitment, and Internal

43


Awareness. The Team includes attorneys, paralegals, business and corporate affairs

professionals and administrators from almost every group within LCA.

The Diversity Team has an executive sponsor, a team lead, and a team program

manager who coordinates the committees. All of the Team’s members are volunteers

who contribute time on top of their day‐to‐day jobs. LCA also has on its HR team a

dedicated, full‐time diversity program manager.

Diversity and Inclusion Initiatives

LCA’s diversity activities fall roughly into three categories, each managed in an organized

way. These are described below:

1. Pipeline Programs

LCA’s Diversity Pipeline Programs focus on educating and developing diverse people into

the profession from early education through the course of their careers. Examples:



K­12 Initiatives

o LCA volunteers work with students as mentors and share their own paths to

careers in the legal profession through the Just the Beginning Foundation and

Future of the Law Institute programs.

o LCA also partners with Microsoft‐wide initiatives IGNITE and Blacks at

Microsoft Student Day to inspire students interested in technology to consider

the intersection of a legal and tech career.

o Sponsorships assist with college scholarship support and stipends for students

participating in programs.

Law School Initiatives

o The Microsoft Women and Minority Law Student IP Summit has drawn

around 1200 participants from law schools, law firms and corporations to

discuss different career paths in IP and connect on diversity best practices since

2003.

o Microsoft is the single largest supporter of MCCA’s Lloyd M. Johnson

Scholarship, providing 3 “Microsoft Fellows” with $30,000 each in law school

funding annually since 2005. Several fellows have been hired to work as LCA

Summer Interns during their 1L.

o Summer Associate Day brings diverse law students working for the summer at

key outside counsel to Redmond to meet LCA attorneys and learn about

Microsoft matters.

o LCA sponsors and partners with the Howard University Institute for

Intellectual Property and Social Justice and the National Black Law Students

Association to support panels on careers in IP law, and also hosts career panels

44


targeted to diverse student groups at the University of Washington, Seattle

University, and Gonzaga schools of law.

2. Employee Development and Retention Initiatives

There are internally focused efforts to develop and retain a talented and diverse workforce.

Examples:

LCA Affinity Groups are modeled on Microsoft’s Employee Resource Groups,

supporting communities for LCA professionals to build their social networks. The

annual Women’s Networking Lunch provides networking opportunities for LCA

women.

To encourage retention through greater work flexibility, LCA has adopted FlexWork

programs for employees and managers to formalize telework, flextime, part‐time and

job‐share arrangements.

Diversity and inclusion learning opportunities are also provided through Doing

Business Abroad Brownbags, LCA Diversity Team Roadshows, Inclusive Behaviors

Training for managers, a robust LCA Diversity Website, and an annual Diversity

Perspectives Panel, bringing leading voices in diversity to Redmond for a discussion

hosted by Brad Smith.

In FY11 LCA will support mentoring through the LCA Without Walls and Cross­

Difference mentoring programs, each designed to facilitate both employee

development and learning from different perspectives.

3. Community Awareness and Outreach

LCA employees participate in a variety of public activities to promote diversity awareness.

Examples:

In FY10 LCA participated in 36 diversity bar association events, with LCA senior leaders

and attorneys speaking on panels, delivering keynote speeches, and participating in

recruiting and networking activities. Additionally, Microsoft products are frequently

featured as prizes in drawings and Microsoft branding is featured prominently at

sponsored events.

At the end of FY10 LCA team members held 14 leadership positions on key committees

and boards in influential organizations including the ABA, Minority Corporate Counsel

Association, Corporate Counsel Women of Color, National Bar Institute, and the

Hispanic National Bar Association.

Microsoft has received recognition for its diversity efforts, including the Lawyers’

Committee for Civil Rights Under Law A. Leon Higginbotham Corporate

Leadership, National Bar Association Corporate Merit, Hispanic National Bar

Association Corporate Partner, ABA Spirit of Excellence, Just the Beginning

Foundation Partner and Minority Corporate Counsel Association Employer of

Choice awards.

45


46


PG&E LAW DEPARTMENT DIVERSITY INITIATIVE & PROGRAM

I. Thoughts on Diversity and the Business Case for Diversity

“We respect each other and celebrate our diversity.”

Statement of Vision and Values, Pacific Gas and Electric Company

The Pacific Gas and Electric Company PG&E Law Department embraces the vision and

values statement of the company. We thrive on diversity and strive to cultivate a

workplace where inclusion, acceptance and mutual respect are the standard. A diverse

workforce leads to diverse thoughts, which, in turn, lead to innovation, excellence in

decision‐making and ultimately better business results.

We provide services to a diverse group of customers and value our ability to reflect the

diversity of the customers we serve. Diversity helps us to better anticipate, understand and

satisfy the needs of our customers.

The Company is committed to providing maximum practical business opportunities to

women, minority and disabled veteran‐owned business enterprises and has an established

Supplier Diversity Department to support each line of business in working with diverse

vendors.

During this economic downturn, we, like many other companies, faced budget pressures

and had to cut costs. However, in 2009, our PG&E Law Department still had a very

successful year. For example, we had one of the most successful years in terms of case

resolution; of the nine cases that went to a decision, i.e., trial or appeal, we had a clean

sweep of favorable results.

In litigation, we spent more than 30% of our 2009 outside counsel budget for litigation on

certified WMDVBE (women, minority and disabled veteran business enterprises) law firms.

Not only are their rates generally lower than at major law firms, we are also able to get the

attention of very talented named partners. Over the years, we have received tremendous

value and great results from these firms on literally hundreds of cases.

Diversity just makes good sense.

Credit for our success in promoting diversity in the PG&E Law Department goes to

everyone in the department. It is and has been a team effort.

47


II.

In­House Counsel – Lawyer Diversity

Ethnicity Female Male Total Percent

Asian American 8 3 11 12.8%

Black/African American 7 1 8 9.3%

Hispanic/Latino 1 2 3 3.5%

White/Caucasian 32 32 64 74.4%

Grand Total 48 38 86 100.0%

Notes: Numbers accurate as of June 30, 2010

Before looking at the diversity of our outside counsel, the PG&E Law Department

considered the diversity of its lawyers. Overall, the attorneys in the PG&E Law Department

are about 56% female and about 44% male. There are 22 ethnically diverse lawyers in the

department (26%).

At the management level, there are Directors and Senior Directors. There are 10 Directors;

3 of the 10 are female (18%) and 2 of the 10 are ethnically diverse (about 18%). There are

4 Senior Directors; 1 of the 4 is female (25%).

The PG&E Law Department works with its Human Resources talent acquisition managers

to obtain a diverse pool of applicants for any open position. Open positions are typically

posted on the Company website. In addition, attorneys in the department often circulate

notices of open positions informally to entities such as local bar associations and local

diverse bar associations for inclusion in email newsletters.

Excluded from the numbers above are our officers because their comparator group is the

group of officers in the company.

Our PG&E Law Department Officers are:

Hyun Park, Senior Vice President and General Counsel and

Sanford Hartman, Vice President and Managing Director

Officer Group Diversity

Ethnicity Female Male Total Percent

Asian American 2 5 7 17.5%

Black/African American 0 2 2 5.0%

Hispanic/Latino 1 3 4 10.0%

White/Caucasian 5 22 27 67.5%

Grand Total 8 32 40 100.0%

Overall, the Officer Group is about 20% female and about 70% male. There are 13

ethnically diverse officers (27.5%).

48


III. Outside Counsel – PG&E Law Department Controlled Spend with Minority

Owned Law Firms

A. The Numbers

Spend with

certified

WMDVBE firms

­ dollars

Spend

with

certified

WMDVBE

firms ­

percent

Spend with

majority firms

­ dollars

Spend with

majority

firms ­

percent

Year Total Spend

2009 $37.10 $8.30 22.4% $28.80 77.6%

2008 $32.00 $5.20 16.3% $26.80 83.8%

2007 $35.80 $4.30 12.0% $31.50 88.0%

2006 $43.70 $2.70 6.2% $41.00 93.8%

Note: All dollars are shown in millions.

Total spend includes fees and costs.

The California Public Utility Commission’s General Order 156 includes some particular

definitions of diversity. Under GO 156, women (regardless of ethnicity or race), specific

racial categories and disabled veterans are considered “diverse.”

The CPUC has established a clearinghouse that certifies business enterprises which are

owned 51% or more by women and/or minorities. There is a separate process to certify

businesses owned 51% or more by disabled veterans. Utility dollars spent with Women,

Minority or Disabled Veteran owned business enterprises (WMDVBEs) are tracked.

The dollar amounts listed above are based on time billed in a calendar year and dollars

actually paid (not accrued) in a particular year.

B. How We Achieved the Numbers

Over the course of several years, attorneys in the PG&E Law Department developed

relationships with diverse bar associations. In 2007, the PG&E Law Department organized

a formal diversity committee open to all attorneys in the department. Each member of the

diversity committee is responsible for maintaining and expanding the department’s

relationship with a particular minority bar group as well as looking for new opportunities

including meeting with minority owned law firm members of the bar group. Collectively,

the members participate in about 10 events in any given year.

49


The PG&E Law Department has participated in events sponsored by and/or supported by:

• American Bar Association Minority Counsel Program

• Asian American Bar Association of the Greater Bay Area

• Asian Law Caucus

• California Minority Counsel Program

• Charles Houston Bar Association

• Corporate Counsel Women of Color

• Filipino Bar Association of Northern California

• Hispanic National Bar Association

• Korean American Bar Association

• Minority Corporate Counsel Association

• National Asian Pacific American Bar Association

• National Association of Minority and Women Owned Law Firms

• National Association of Women Lawyers

• National Bar Association

• San Francisco La Raza Lawyers Association

• Wiley Manuel Law Foundation

PG&E is a multi‐year sponsor of the VAULT/MCCA Guide to Law Firm Diversity Programs.

The PG&E Law Department values these relationships and works to strengthen them.

C. How We Gather and Use Information to Improve our Knowledge Base

Through the network of relationships outlined above, the PG&E Law Department created

and maintains a list, posted on the department intranet, with information about known

women, minority and disabled veteran owned law firms and whether or not the firms work

for the PG&E Law Department. The list is updated periodically with information collected

by diversity committee members at events they attend. The list is an easy‐to‐access

resource for all attorneys in the department. Hardcopy diversity materials are also

maintained as files in order to keep more detailed information. The Committee also fields

questions and calls requesting names of diverse attorneys with particular areas of

expertise.

D. Internal Controls

Prior to retaining any new firm, the PG&E Law Department Vice President and the attorney

proposing to hire the new firm discuss the firm and review a number of key points.

Appropriate experience and specific knowledge of key issues are critical; we want to hire

the right attorney for each matter. However, there are a number of other factors, such as

price, expertise and diversity, which we also consider when selecting a new firm.

50


IV.

Outside Counsel – Spend with Diverse Lawyers and Paralegals at Majority

Owned Firms

A. The Numbers

In 2009, the PG&E Law Department spent about $37.1 million with law firms on fees and

costs. Of that amount, about $28.8 million was spent with majority owned law firms that

account for approximately 80% of the PG&E Law Department’s payments for legal services

to majority owned law firms. About $2.5 million was spent with women, minorities or

disabled veteran attorneys and paralegals at those majority owned law firms.

Notes:

The dollar amounts listed above are based on time billed in a calendar year and dollars

actually paid (not accrued) in a particular year.

The data set forth is accurate within approximately +/‐ 5%. This is due to, among other

things, variances between data submitted by law firms used to compile these materials and

PG&E's records of actual spending.

The PG&E Law Department measures and reports its spend with women and minorities at

majority owned law firms. Law firms are asked to voluntarily report data for billing

individuals as diverse or not diverse as that term is used in the California Public Utility

Commission’s General Order 156. Under GO 156, women (regardless of ethnicity or race),

specific racial categories and disabled veterans are considered “diverse.”

B. How We Achieved the Numbers

The diversity committee supports attorneys in the PG&E Law Department who hire outside

counsel and manage the relationships in monitoring and evaluating diversity activities

undertaken by the large majority owned law firms that work for the PG&E Law

Department. As needed, law firms have been contacted when matters may not be staffed in

a manner that supports the company’s commitment to diversity.

The PG&E Law Department has explored events in several formats to facilitate networking

and diversity opportunities including individual meetings, lunches and receptions. The

PG&E Law Department works with its firms that are interested in hosting receptions to

provide minority owned firms with greater access to in‐house counsel and allow attorneys

at majority owned firms who might provide partnering opportunities to network with

attorneys at minority owned firms.

The concept has expanded to become a series of quarterly receptions attended by in‐house

counsel at large California utilities. Additionally, rather than being limited to networking,

51


the receptions have evolved into opportunities to share ideas such as hosting a panel

discussion entitled “Promoting Diversity Through Partnering” which was a frank

discussion of the pros and cons of partnering by attorneys at minority owned firms and

majority owned firms who had engaged in partnering.

V. Pipeline Programs

Pipeline support efforts help to ensure that there is a diverse pool of attorneys entering the

profession. A number of the entities listed above host charitable events to raise funds for

student scholarships and the PG&E Law Department supports those events as part of its

pipeline work. The San Francisco La Raza Lawyers Association annual Noche de Gala

fundraiser for law student public interest fellowships and Wiley Manuel Law Foundation

scholarships are a couple of examples.

In addition, we are proud to be the first law department to fully fund a Bar Association of

San Francisco Foundation, Bay Area Minority Law Student Scholarship which is a 3 year

commitment (2008‐2010) of $10,000 per year. This scholarship is awarded to talented

students who have been admitted to top law schools in California, but have significant

financial need. The Company and the PG&E Law Department are proud to be leaders by

supporting this effort to expand access to the profession to all students. By working with

the Charitable Contributions Department in the Company and the local bar associations,

the PG&E Law Department is able to support a range of pipeline programs.

For several years, the PG&E Law Department has coordinated with the Coalition for

Diversity, a group of law students at U.C. Berkeley, to support their annual law school

admissions workshop for diverse undergraduate students. The PG&E Law Department

reached out to diverse contacts at Morrison & Foerster which became the signature

sponsor of the event for two years in a row.

The PG&E PG&E Law Department also takes great pride in its Diversity Pipeline Internship

Program which truly demonstrates the department’s commitment to diversity. The

Diversity Committee is responsible for interviewing and selecting 1Ls for summer

internships or 2Ls for fall internships. During the course of the internship, members of the

Committee introduce those students to attorneys at minority owned firms and majority

owned firms to expand the students’ networks.

Up to four students are selected based on criteria that include academic excellence,

personal or professional achievement in overcoming hardship, and a demonstrated

commitment to diversity. The students submit a resume, writing sample, personal

statement and grades. The program provides an opportunity for students who have

completed their first or second year in law school to learn about the multifaceted energy

practice and working in‐house.

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During the eight‐week summer program or semester long fall program at PG&E’s San

Francisco headquarters, each student receives a variety of work assignments in multiple

practice areas which may include litigation, commercial and regulatory. Students have an

opportunity to visit a variety of facilities and plants to gain a real world understanding of

the business and how the PG&E Law Department supports the Company’s business. During

the summer, each student receives competitive compensation; during the fall, each student

receives credit from their law school.

There is no single coordinator for the internship program. Each year, a group of attorneys

in the PG&E Law Department work together to make the program a success. It is a

measure of the PG&E Law Department management’s commitment to diversity that it

supports attorneys spending otherwise billable time on the internship program so that the

attorneys can work on the program and interact directly with the students as often as

possible. Members of the Committee have kept in touch with the interns to provide

contacts, further mentoring and assist the former interns as they begin their legal careers.

The internship program is more than a summer or fall program, it allows the PG&E Law

Department to become part of a continuing network supporting diversity in our profession.

The PG&E Law Department Diversity Pipeline Internship program also addresses a

comment made by several members of large firms who say that they cannot find qualified

diverse law students to hire. In fact, a law firm, that has been working to improve its

diversity statistics and which approached the PG&E Law Department seeking assistance,

has now hired one of the interns as an associate. The interns are an impressive group and

continue to reach out to others. Based on contacts made during the program, one former

intern put together a panel of diverse in‐house and government lawyers to speak to the

diverse students at her law school. Another former intern participated on a panel for

diverse undergraduates interested in attending law school through an organization she

learned about during her summer with PG&E.

VI.

Summary

The narrative above provides information about what the PG&E PG&E Law Department is

doing as a group to make a difference. Promoting diversity and inclusion in our profession

is an ongoing process. That includes monitoring the PG&E Law Department spend with

minority owned firms as well as the spend with diverse individuals at majority owned

firms. The data gives you a quantitative measure of progress being made by the PG&E Law

Department. However, because there are many different ways to advance the issues of

diversity and inclusion in our profession, the PG&E Law Department also focuses on

supporting diverse bar associations and doing hands on work with its Diversity Pipeline

Internship program.

53


54


SEMPRA ENERGY utilities

INFORMATION FROM 2009 ANNUAL REPORT

ON DIVERSE BUSINESS ENTERPRISES (DBE)

Legal Services

Southern California Gas Company (SoCalGas) and San Diego Gas & Electric (SDG&E)

continue to successfully expand opportunities for women and minority‐owned law firms.

In 2009, our utilities spent $2.9 million with women‐ and minority‐owned law

firms. This constitutes approximately 10.4 percent of the utilities’ total legal

spend for 2009. It is important to note that over half of SoCalGas and SDG&E’s

legal spend for 2009 was attributable to “Firestorm” litigation in San Diego.

Absent the Firestorm cases, our utilities would have $12.9 million in total legal

spend, more than 22 percent of which went to DBE law firms. Firestorm legal

spending will continue to have a very significant negative impact on 2010 results

which are expected to improve once this litigation ends.

The 2009 results are just the latest of SDG&E’s and SoCalGas’ efforts to expand the amount

of work handled by DBE firms. Starting in 2005, the utilities spent $340,000 with DBE law

firms, which grew to $660,000 in 2006, $1.6 million in 2007 and $3.3 million in 2008 (for

19.5 percent of total legal spend).

55


56


Diverse Business Enterprise Law Firms

There are now 17 DBE firms providing legal services for our utilities in securities,

real estate, general litigation, intellectual property, workers’ compensation,

venture capital projects, employment and labor law and asset recovery. Further, the

SoCalGas and SDG&E General Counsel regularly meets with lawyers from

emerging DBE firms to develop relationships with attorneys who may be able to

provide legal services for the utilities in the future.

Diverse Attorneys at Majority Law Firms

SoCalGas and SDG&E attorneys also strive to develop and maintain relationships with

diverse attorneys at majority‐owned firms. In 2009, the utilities spent $9.5 million with

minority and female attorneys at majority‐owned law firms, which is 48 percent of total

spend at those firms. This represents an increase of $3.9 million (or 68 percent) of our

work with majority legal firms. Results in this area for 2008 were over $5.6 million at

majority‐owned firms. These very positive results come from years of our General Counsel

meeting with management of the majority law firms to promote opportunities for diverse

legal counsel at those firms.

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Diversity Efforts for the Legal Community

One of the important elements of the SoCalGas and SDG&E Law Department’s

diversity program is the active promotion of diversity in the larger legal

community. The Law Department continues to sponsor a DBE legal reception

each year in San Diego and attends several other receptions throughout the year

in Los Angeles and San Francisco. In addition, the General Counsel is a

member of the board for the California Minority Counsel Program (CMCP) and

we hosted and participated in the CMCP Symposium on partnerships between

DBE and majority‐owned law firms in March 2009. Our utilities also participate in

the CMCP Corporate Connections events held each year in southern and

northern California. Among a number of other activities, the Law Department

donates to many diverse bar associations each year, as well as to a number of

organizations that provide pro bono legal services for minority communities.

For the last several years, the Sempra Energy utilities (SEu) Law Department

has hosted diverse first year law students as summer interns as part of its efforts

to improve the pipeline of women and minority attorneys. In 2009, the Law

Department was one of the founding participants in a Diversity Fellowship

Program developed by the San Diego County Bar Association in partnership with

the San Diego Chapter of the Association of Corporate Counsel. As a participant

in the program, the Law Department hosted first year law student fellows from

the program in its San Diego and Los Angeles offices. In addition, two SEu

attorneys participated on the planning committee for the program and SEu

hosted an event for all of the participating law firms and corporate legal

departments and the prospective fellows.

With the support of our initiatives, SoCalGas and SDG&E look forward to making

additional progress and continuing the growth of legal diversity in 2010 and

beyond.

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WAL­MART STORES, INC.

Walmart's Legal Department has established an extremely strong brand in the diversity

arena beginning with the implementation of the first phase of our diversity programs in

2004. Since then, the department has continued to refine and revamp departmental

initiatives so as to maintain the momentum gained.

The Legal Department’s diversity efforts have been focused on four key areas:

the in‐house legal team,

bar organization partnerships,

outside law firms, and

the pipeline of future lawyers coming into the profession.

In­house Legal Team

Jeff Gearhart is Executive Vice President and General Counsel of Wal‐Mart Stores, Inc. and

is responsible for all legal matters affecting the company in both its domestic and foreign

markets. In 2002, only 11% of the Walmart in‐house attorneys were attorneys of color and

36% were women. As an integral part of an ambitious plan to build a more effective legal

department capable of handling an unprecedented volume of complex legal work, the Legal

Department set out to attract the best legal talent that it could find and in the process

developed one of the most diverse legal departments anywhere in corporate America.

The diversification of the Legal Department resulted from networking with dozens of legal

diversity organizations and their members. The work was successful and as a result, the

Legal Department established a coast‐to‐coast recruiting pipeline through which Walmart

hired a number of first‐rate lawyers.

Today, the Walmart Legal Department is comprised of more than 150 attorneys, including

53 attorneys of color or 35% of the department and 64 women or 42% of the department.

This does not include Walmart attorneys in international offices. It is also noteworthy that

the current diversity figures do not account for several women attorneys and attorneys of

color from the Legal Department promoted to key management positions in various

business units within the Company since 2002.

Walmart’s Legal Department has distinguished itself, not only in terms of hiring talented,

diverse lawyers, but just as importantly, in terms of promoting women and minorities to

management positions. Thus, attorneys of color and women attorneys are in leadership

positions throughout the various levels of responsibility within the department. This

diversity is the natural result of a recruiting program that emphasized the importance of

integrity, strong skills sets, experience, academic credentials, and the ability to produce

results.

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Bar Organization Partnerships

Networking by Walmart attorneys at legal diversity organization events has led to vibrant

partnerships with organizations like the following:

American Bar Association Commission on Racial and Ethnic Diversity

Corporate Counsel Women of Color

Hispanic National Bar Association

Minority Corporate Counsel Association

National Asian Pacific American Bar Association

National Association of Minority and Women Owned Law Firms

National Association of Women Lawyers

National Bar Association

National Native American Bar Association

Walmart attorneys have participated in numerous events hosted by these and other

organizations, and frequently appear as program presenters. Walmart attorneys have also

played active roles in the leadership of a number of organizations and initiatives which

focus on diversity in the profession including the following:




(LCLD) ‐ Walmart is a co‐founder of the newly created Leadership Council on Legal

Diversity ("LCLD"), the groundbreaking new organization that has positioned itself

as the leader on corporate diversity issues. In that role, Walmart attorneys helped

create the group's organizational structure, drafted its initial mission statement,

helped organize its initial series of informational meetings and drafted the talking

points that were used as its primary recruitment tool.

(NAMWOLF) ‐ Walmart is one of the founding members of the Diversity Initiative

created through the National Association of Minority and Women Owned Law Firms

(NAMWOLF) and in 2009 Walmart was granted the organization's highest award in

recognition of the tremendous impact its efforts have had on providing

opportunities for women and minorities in the profession.

(ABA) ‐ Walmart attorneys serve, through appointment by the president of the ABA,

on the ABA's Commission on Race and Ethnicity in the Profession as well as on the

Commission’s Minority Council Program and MCP Fellows Program Committee.

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Outside Firms

Walmart’s outside law firms are evaluated on performance, cost effectiveness, and

diversity. Law firm diversity is measured by good faith efforts and results. Walmart is a

signatory to “The Call to Action”, which is a corporate commitment by a number of Fortune

1000 companies to advance diversity in the profession. The commitment states that firms

are required to have diversity as a key component of their business models. Over the years,

Walmart has launched initiatives to challenge its outside law firms to do their part to

ensure that the legal profession reflects meaningful diversity.

Since 2005, Walmart has assigned women and lawyers of color, or both, to be relationship

partners with its key law firms. This has translated to a shift of millions of dollars in legal

business that was previously in the hands of white male partners to deserving women and

minority partners who now have the responsibility for and control of all the Walmart

business in their law firms. The legal department has also increased its use of minority and

women‐owned law firms. Wal‐Mart expects the best attorneys and a diverse team of

attorneys to handle its work at outside law firms. On at least an annual basis, the outside

law firms provide information regarding their performance, cost effectiveness, and

diversity.

Not content to rest on our laurels, Walmart legal has, as of September, 2010, implemented

the following changes to its outside counsel management of firms in order to further

support its diversity programs:


(FLEX ‐ TIME) ‐ Walmart, mainly through its relationship with PAR (the Project for

Attorney Retention), has become one of the primary drivers of the issue of balanced

work arrangements in the legal profession. Walmart recently hosted the first of its

kind Flex‐Time Summit, which featured nationally recognized speakers as well as

hands‐on training on Walmart's internal flex‐time policies as well as best practices

for managing the work of external flex‐time lawyers. Changes to Walmart’s outside

counsel guidelines will require external law firms to develop and implement flextime

policies. We will also require that at least one partner on a flexible work

schedule be included among the names of the five candidates firms are required to

submit (at least one has to be a woman and one a person of color as well) for

consideration for relationship partner.

(ORIGINATION CERTIFICATION) – In 2006 Walmart succeeded in shifting over $60

million of outside counsel spend annually to the control of women and minority

relationship partners simply by taking over the process of selecting those

relationship partners. We recently gathered anecdotal evidence that this initiative

was not operating as intended. The problem was that many of the women and

relationship partners we selected were being cut out of the loop in the process of

work being directed to the firm and were thereby not receiving the origination

credit they deserved. In revising our outside counsel guidelines, we recently

instituted a requirement that all firms annually certify that the Walmart relationship

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partner did, in fact, receive origination credit for all work sent into the firm. The

certification would be required from the CFO or Managing Partner of the firm. Any

firm which certifies falsely would be terminated.


(FIRM SCORECARD) ‐ In order to reduce subjectivity and to encourage our firms to

adhere to the three yardsticks whereby we measure our outside firms (Cost

Effectiveness, Diversity and Performance), we have begun developing a firm

scorecard that would rank firms in these three areas. Firms that score poorly would

be ineligible to receive new matters.

Pipeline Programs

Given Walmart’s position in the business and legal community, the Legal Department is

focusing increased efforts on impacting the diversity of the pipeline of future attorneys.

Beginning at home, the Legal Department has externship and internship programs that

regularly include women and attorneys of color among the participants. The Legal

Department is active with the University of Arkansas School of Law at both the Fayetteville

and Little Rock campuses and provides scholarship funds. Additionally, Walmart attorneys

present at programs and events. Also, the Legal Department partners with legal

organizations around the country on pipeline programs such as the Hispanic National Bar

Association and the National Bar Association’s law camps for high school students held

each summer in Washington, D.C. Walmart’s in‐house attorneys are involved in a host of

other educational and pre‐law programs aimed at increasing the number and the diversity

of students moving toward the legal profession. Outside law firms handling Walmart’s

work are involved in these efforts as well.

Awards and Recognitions

Although the Legal Department has not sought out recognition and awards for its diversity

efforts, Walmart has been honored with several awards. The following list is a sampling of

the honors:

National Association of Minority and Women‐Owned Law Firms, Advisory Council

Award – October, 2009

Minority Corporate Counsel Association

Employer of Choice Award, South/Southwest Region – February, 2006

National Association of Women Lawyers President’s Award – July, 2006

National Bar Association, Hall of Fame Induction – August, 2010

Cora T. Walker Corporate Partnership Award ‐ August, 2006

Corporate Counsel Diversity Award ‐ September, 2006

Dr. Martin Luther King, Jr. Visionary Award ‐ January, 2007

American Bar Association Commission on Racial and Ethnic Diversity Spirit of

Excellence Award ‐ February, 2007

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COPYRIGHT© 2011 California Minority Counsel Program

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