Trump: Deals have negative effect on firms’ scores in index
Large law firms which struck deals with President Trump to avoid punitive executive orders have been downgraded by a UK-based rating system which aims to help corporate clients assess “the integrity and values” of law firms.
Stuart Woollard, co-founder of the Maturity Institute, said one US firm which did a deal earlier this year with President Trump on diversity, equity and inclusion (DEI) had dropped “just over 10 percentage points” in the Law Firm Maturity Index.
Latham & Watkins was given an initial rating of ‘A’ by the index but had since been rated as BBB+.
In March this year the US Equal Employment Opportunity Commission demanded information from 20 major law firms about their DEI policies amid the president issuing executive orders to penalise certain large practices.
The following month a number of large law firms, including Latham & Watkins, A&O Shearman, Kirkland & Ellis and Skadden, did deals with the president.
A&O Shearman and Latham & Watkins each agreed to provide $125m (£96m) in pro bono and other free legal services for “causes that President Trump and the law firms both support and agree to work on”. Skadden agreed to provide $100m of free services.
In the latest version of the maturity index, Latham is in joint third place with a BBB+ rating, along with six other law firms, including UK-based firms Clifford Chance, Linklaters, Herbert Smith Freehills and Gateley.
Skadden, Kirkland & Ellis, and a number of other firms including DLA Piper, Hogan Lovells and Eversheds Sutherland, are graded BBB.
A&O Shearman appeared with other firms, such as Ashurst and Dentons, all awarded the grade of BBB-.
The index uses the a model that are said to go beyond traditional ESG (environmental, social and governance) and DEI measures.
Ratings reflect firms’ capacity to manage value through complex stakeholder systems – including employees, clients, suppliers, and communities – and are adjusted as new evidence emerges from firm actions, regulatory findings, and media reporting.
Mr Woollard said the Law Firm Maturity Index was launched last November to assess the top 30 UK law firms, according to revenue.
Since then a number of other firms were added at the request of in-house lawyers interested in using data from the index in assessing their law firm panels.
“For the latest release we wanted to include a selection of ‘elite’ US firms as we have received interest from the US-based legal sector.
“This has also become interesting to us because we could compare firms who had done deals on DEI with the Trump administration, with those that hadn’t.”
Mr Wollard said that of the 32 factors measured by the Index, the impact of DEI agreements mainly affected scores on values, trust, strategic cohesion, adaptability, and authenticity.
The Maturity Institute said the latest version of the index showed that law firms remained susceptible to “significant, human risk” in the form of staff burnout, turnover, regulatory fines, and toxic culture.
They would continue to find solving complex challenges, such as “integrating sustainability, embedding inclusion, and managing workforce well-being”, to be “challenging and often elusive”.
Law firm M&A activity carried “material culture risks, where anticipated performance and value opportunities can be undermined”, with evidence from recently integrated firms such as A&O Shearman showing how “people, management systems, and culture factors are often ignored, misunderstood or underestimated”.
US firms that agreed DEI deals with the Trump administration carried “significant stakeholder risk” in the form of “staff and client attrition”.
Mr Woollard said the fact that in-house lawyers and organisations were requesting index data showed the appetite for “a new kind of transparency”.
He added: “More law firms are beginning to realise that human factors are not soft issues, they are hard drivers of success and sustainability.”
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