Coca-Cola to penalise outside firms for insufficiently diverse teams

Coca-Cola: Getting real with external firms

Drinks giant Coca-Cola is to start penalising its panel law firms with reduced fees if they fail to deliver on diversity commitments, in a shift starting in the US and then expanding globally.

General counsel Bradley Gayton said that, as a consumer of legal services, “we believe that diversity of talent on our legal matters is a critical factor to driving better business outcomes”.

As a result, the company was “no longer interested in discussing motivations, programs, or excuses for little to no progress – it’s the results that we are demanding and will measure going forward”.

In a letter sent to all US firms Coca-Cola works with, Mr Gayton argued that all the score cards, summits, committees and action plans created by the profession over the years were not working.

“The hard truth is that our profession is not treating the issue of diversity and inclusion as a business imperative. We are too quick to celebrate stagnant progress and reward intention.

“We have a crisis on our hands and we need to commit ourselves to specific actions that will accelerate the diversity of the legal profession. Our profession needs to be representative of the population it serves. All of us in leadership positions need to be the drivers of that change – and we will be better for it.”

For each new matter, external firms must commit that at least 30% of each of billed associate and partner time will be from diverse lawyers, and of such amounts at least half will be from Black lawyers.

“Work performed by diverse attorneys is expected to be accretive to their development and advancement at the firm. These percentages are approximately linked to US Census population data.”

These commitments will be adjusted over time as census data evolves, with an ultimate aspiration that at least 50% of billed associate time and billed partner time will be from diverse attorneys with at least half of that amount from Black attorneys.”

If a firm fails to do this, they will have to provide a plan to meet the commitment. Failure to meet the commitment over two quarterly reviews will result in a “non-refundable” 30% reduction in the fees payable on the matter until the commitment is met.

Continued failure may result in the firm “no longer being considered” for Coca-Cola work.

Firms that cannot meet the commitments internally are encouraged to work collaboratively with other firms, while each firm’s managing partner must publish “a personal commitment to diversity, inclusion and belonging and related action plans setting forth measurable goals”.

Coca-Cola will also require that two or more diverse lawyers, at least half of whom are Black, must be candidates for succeeding to the relationship partner role. Its goal is to have at least 30% diverse relationship partners “at our highest-spend and preferred panel firms, with at least half of these partners being Black”.

Within 18 months of the new guidelines coming into force, Coca-Cola will name a panel of preferred firms; meeting these commitments will be a “significant factor” in being successful in this.

“While the above actions focus on the United States for now, we intend for these initiatives to be customized and applied throughout our global organization,” Mr Gayton said.

He also laid out actions the Coca-Cola legal team will take itself, including increasing its annual North American spend with minority or women-owned enterprises from 1% to at least 10% this year and more in the future, as well as a focus on hiring and leadership.

Some 51% of Coca-Cola’s US lawyers are ethnically diverse.

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