Gender, National Association for Law Placement (NALP), Partner Profits, Women's Issues

NALP Won’t Distinguish Between Equity and Non-Equity Partners: Women, Minorities, and Lovers of Truth Get Angry

NALP logo.JPGAbout a week ago, K&L Gates’s Peter Kalis called for the abolition of NALP. Kalis was focused on NALP’s well-documented problems trying to guide the recruitment of fresh talent to Biglaw. Kalis isn’t alone in thinking that NALP does an ineffective job setting out legal recruitment guidelines.
But if the organization can’t even be trusted to accurately report statistics, then maybe we really do need to examine what value NALP is adding to the process. There has been a movement, led by various groups of women lawyers, to get NALP to acknowledge the difference between equity partner and non-equity partner when reporting diversity stats. The distinction is important for women and minority groups trying to asses whether or not firms are doing a good job at promoting women and minorities to partner. You know, actual partners — not the non-equity “partners” who don’t get a share in the firm’s profits (and thus don’t affect profit per partner numbers as reported to Am Law).
The importance of becoming an actual partner as opposed to a non-equity employee should be obvious, but I’ll let Ms. J.D. explain:

Thanks in part to the efforts of groups like NAWJ, NAWL and MCCA, surveying and ranking organizations like Vault and AmLaw have learned to distinguish between equity and non-equity partners when collecting data from firms on stats like profits-per-partner and diversity. As you can imagine firms have an incentive to decrease the number of people they describe as partners when reporting profit-per-partner numbers and increase it to include more women or racial minorities when reporting diversity numbers. Firms care about the resulting rankings. We need to keep these firms honest to leverage the rankings as an additional force for increased diversity in firms.

It seems like the organization charged with collecting partnership data from law firms should be most sensitive to this distinction. But apparently NALP has decided that it will continue to ignore the distinction between equity and non-equity partners.
What’s the rationale for NALP’s position?


As clear as anyone can tell, NALP has decided to not make this crucial distinction because it is too hard. Am Law Daily reports:

“The majority of our members refused to provide the breakdown,” says NALP executive director James Leipold. “Many [firms] said they would not fill [out] the NALP form if we required it.” NALP dropped the effort on February 12.
NALP’s legal employer directory, which appears both online and in book form, “represents an important revenue source for us,” admits Leipold, “[so] we had to back peddle on this.” He adds that NALP will continue to try to convince firms to cooperate in the future.

It’s one thing to make editorial sacrifices for business reasons. That stinks, but this is a recession — and “NALP’s gotta eat,” as the kids say.
But Leipold isn’t talking about making an inconsequential stylistic change in the face of a recession. He’s talking about material misstatements of partnership numbers that will be memorialized in NALP’s publications.
Non-equity partners are not full partners. That’s not semantics, it’s a basic fact of the law firm business model.
NALP isn’t getting a ton of help with their efforts to force law firms to be honest about their partnership situations. Michele Dauber, a Stanford Law professor and Building a Better Legal Profession board member, explained to ATL what NALP is up against:

Of course, it is true that the hiring market is terrible. And it is true that the law schools also are spineless wimps that won’t stand behind NALP and insist that firms comply with the NALP form if they want to recruit on campus. Hell, we won’t even insist that they don’t discriminate if they want to recruit on campus. We’re running around begging firms to hire our students into fake ghost payroller jobs that would have made Richard Daley blush so that we can tell US News our kids have “jobs.” So, you can’t totally hate on NALP for running for cover.

Let’s not forget that NALP wouldn’t even be in this position if the firms themselves had any desire to be truthful and transparent about their equity/non-equity partnership split. Am Law reports this tortured logic from Jones Day — one of the firms that refuses to report equity partner versus non-equity partner numbers to NALP, and yet a firm that has been extremely critical of NALP in the past:

One reason some of the law firms refused to divulge the information — the distinctions are a matter of firm business and firms aren’t obligated to share the information. “How we divide profits is our business,” says Joe Sims, a senior partner at Jones Day, who insists that the firm makes no equity/nonequity distinction. “All partners make capital contributions and have voting rights,” he says, though he does acknowledge that some partners are paid a fixed amount and others are paid based on the firm’s profits.
NALP’s Leipold says most firms cited privacy concerns for not divulging the details of their partnership arrangements. Because some firm offices are quite small, firms indicated they were concerned that nonequity partners would be easily identified and stigmatized, says Leipold.

Firms can play word games all they want. But at the end of the day there are owners and there are employees in a law firm. Owners (or shareholders or partners or whatever) get a cut of the profits. Employees (or associates or non-equity partners or whatever) get a salary determined by the owners of the firm.
Professor Dauber broke down the argument offered by Jones Day and other firms that don’t want to report their true numbers:

What the firms are actually worried about isn’t the “privacy” of the women and minority lawyers who they have relentlessly publicly humiliated for generations (literally). Obviously, that argument doesn’t pass the smell test. What they are worried about, alluded to in crazy-eye hystrionic quote Joe Sims of Jones Day gave to AmLaw reporter Vivia Chen, is the privacy of their bottom line — determined of course in large measure by their billing rates.

They don’t want their clients to be able to figure out who’s an Equity Partner and who’s a “partner.” “Why are we paying $700 per hour for a glorified associate?” a client might reasonably ask. And in this economy, will ask.

No, children, Jones Day is not worried about protecting the feelings of black women lawyers. In fact, Jones Day NY only has one black partner, 2 Hispanic partners, and 3 Asian partners. I really doubt that they devote a lot of time in management meetings to the question of how they can protect the privacy and happiness of these 6 people. For one thing, if they did, they would have hired and promoted more than 6.

And because these facts are so obvious, you really can’t let NALP off the hook for caving to the law firms and publishing misleading statistics. As Dauber further explained to Above the Law:

It was the speed with which NALP beat a retreat that was stunning. Why not offer the firms a compromise that called their bluff? You’re worried about protecting privacy? Fine, exempt offices of fewer than 50 lawyers. Or, in the alternative, why not have the firms report only equity partners and lump their NEP together with associates into a new category of “salaried attorneys.”
The status quo of NALP reporting is unfair to equity-only firms like Wachtell, that suffer comparisons to firms like Greenberg that juice their PPP to Amlaw and juice their diversity to NALP and Vault. Apples to apples comparisons would be less flattering to these fakers, and that is exactly what they don’t want. And apparently now they are somehow able to intimidate everyone even though they have just demonstrated a lack of any business judgment or ability by their spectacular flame-outs. Disgusting.

And that’s putting it nicely. Because, at the end of the day, this isn’t even about diversity in law firm partnerships — which all already know could use some work. It’s about an ostensibly “independent” organization caving to Biglaw spin doctors on an issue of fact. What is the point of an information-gathering organization that can’t gather accurate information?
Let firms like Jones Day refuse to report their numbers. Or don’t report partnership numbers of any firm at all. But don’t sit there and publish information you know to be misleading at the time you publish it. That lacks integrity.
Keeping It Real: Why Won’t NALP Distinguish Equity Partners? [Ms. J.D.]
What Women Want: Partnership Details [Am Law Daily]
Abolish NALP now [National Law Journal]
Earlier: Hell of a (Jones) Day, Today

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