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Firms can choose from two alternative diversity goals. The first is a 2% increase in the hours worked by U.S.-based diverse attorneys as a percentage of total hours worked on Microsoft matters, compared with the same time period last year. The second goal is a 0.5 percent increase in the total number of U.S.-based diverse attorneys employed by the firm.

In other words, the first goal focuses on diverse representation for Microsoft, while the second focuses on diverse representation in the firm’s U.S. offices overall. Microsoft practices what it preaches; 44% of its senior counsels are women or minorities, and 50% its junior level attorneys are women or minorities.

Microsoft’s efforts to increase diversity within its outside counsel are noble, but the solution it offers is questionable. Providing “bonuses” for law firms to do what they should be required to do ethically, morally, and professionally in the first place, is a sad commentary on the state of our legal industry.

It is easy to understand Microsoft’s effort to try something new. Four year since the "Call to Action" was launched, little has changed in terms of law firm diversity. Yet, the solution it offers leaves much to be desired. Are incentives without sanctions little less than a bribe? And more importantly, is this an effective solution?

Throwing money at a problem has seldom yielded correct solutions. This is especially true when one considers the types of revenues generated by big U.S law firms. As reported by The Lawyer (March 24, 2008), U.S. firms had their best year ever in 2007, with the top 50 firms generating collective revenues of $46.8 billion!

Will a 2% bonus on hours already worked, as proposed by Microsoft make a difference one way or the other? That’s unlikely for big firms who are already guaranteed to make $150M in fees.

Is it the solution itself that is problematic, or the fact that it lacks teeth to be effective? It’s probably a little bit of both. It is difficult to get over the unpleasant taste of companies giving bonuses, in what essentially mounts to “bribes” to law firms to do what they should be doing in the first place. Perhaps it is part of the solution. While it is evident that in order to effect tangible change, companies need to tie their demands to the purse strings of law firms, spending more money on a broken system will not alone fix the problem.

What we need is accountability from law firms. Law firms need to develop business plans and strategies that fundamentally incorporate diversity as part of their structure and organization, together with measurable benchmarks and goals. In order to obtain this, companies should implement a combination of sanctions and incentives that have measurable impacts on the revenues of big law firms.

If Microsoft had in addition to its "Law Firm Diversity Program" implemented a measure whereby it committed to only engage law firms that either increased the hours worked by its U.S.-based minority attorneys by 2%, or increase the total number of their U.S.-based minority attorneys by 0.5% - then the policy would have had the kind of teeth to effect real change. Threatening $150M in revenues has a lot more of an impact than potentially adding another $30M to the pot.

Many corporate clients already reward diversity in their outside counsel (not in terms of bonuses per se, but by giving these firms more work, preferred provider status, or by hiring them in the first place)—yet, the numbers of women and lawyers of color at those firms have not changed much. Obviously, rewards alone, whether monetary or otherwise, are not sufficient to effect change in this situation.

The Call To Action pledged that corporations would end relationships with law firms that hadn't made significant progress in becoming more diverse. Yet, few companies have committed to this pledge. If they had, the legal landscape might look quite different.

Susan Hackett, senior vice president and general counsel of the Association of Corporate Counsel, who has been involved in Call To Action, stated in a recent (May 2008) National Law Journal article that companies were not ready to make this kind of sacrifice.

"While they may be committing to diversity principles, that's a difficult decision when talking about firms that have done good work for you," Hackett stated. Also, general counsel executives could feel hypocritical judging the diversity of the law firms they use if they haven't made substantial progress in their own law departments, she said.

If this is the case, then how can companies ask law firms to increase diversity within their ranks when they are not committed to doing the same within their own legal departments, or are unwilling to make the necessary sacrifices themselves? Most probably can't. On the other hand, a company like Microsoft, that has made a genuine commitment to diversity, had an opportunity to take a stance and initiate real change. Instead, it stopped one step short…and so will its law firms.