“Over the past few months, organizations have moved the fight for racial justice and equality to the core of their sustainability agendas. Lawyers and business leaders have a unique and critical role to play in assuring these latest initiatives create sustainable change.”
—Tim Wilkins, Freshfields
On 14th October, Tim Wilkins and his brother Professor David Wilkins held a webinar, which you can watch here, on the macro-economic and social trends impacting the fight for racial justice. They discussed whether these trends and the recent initiatives by companies and law firms following the tragic killings of George Floyd and Breonna Taylor offered a new hope of bringing about racial equality and opportunity.
They approached the topic from their different perspectives as a practitioner and professor. Tim Wilkins is the Global Partner for Client Sustainability at the global law firm Freshfields Bruckhaus Deringer and Professor Wilkins is the Lester Kissel Professor of Law and Faculty Director of the Center on the Legal Profession at Harvard Law School.
In this post, we will cover the main themes and insights of the webinar. The following is a 1 minute overview of the key takeaways and the fuller summary of the webinar.
60 Second Read of Key Takeaways
- Professor Wilkins introduced that the fight for racial justice should be first put in macro-economic and social context. Practitioners in the legal field have had to respond to a rapidly and continuously changing economic climate, starting with the 2008 housing crisis through the 2020 trifecta of a pandemic, economic crisis, and societal demands for social justice. Against this backdrop, lawyers have had to adjust how they advise businesses in the face of an explosion of new laws and regulations.
- The legal industry is also responding to the need for greater diversity in the field. Clients are demanding broader racial, ethnic, and gender diversity from their providers to meet the novel challenges they face. The Millennial and Generation Z workforce will make-up more than half of the personnel in the coming decade, and this group has made it clear that purpose and meaning are a driving factor in their professional and personal lives. For law firms to compete for the best talent, they will need to lay the groundwork now.
- Tim Wilkins built on his brother’s recognition of macro-trends to emphasize how multi-stakeholder pressures may lead to swifter advances on racial justice and equality. With the rising influence of the Business Roundtable and other coalitions, businesses are considering their long-term ability to be sustainable; this means fostering a symbiotic relationship with its workforce, community, suppliers, consumers, and of course, shareholders.
- As a best practice, Tim Wilkins proposed a “4 P” framework of leveraging the power of the Purse, Pulpit, People and Practice. He provided a number of examples of Fortune 100 companies who have pivoted away from an old playbook of supporting social causes and responding to crises and have announced initiatives that will provide for public accountability on their success (or failure), capitalize on their expertise in an industry and work toward a transfer of sustainable wealth to communities of color.
“May You Live in Interesting Times”
Professor Wilkins kicked off the webinar setting out how lawyering needed to be reimagined in this “world on fire,” adopting the phrase from the influential book by Rebecca Henderson, Reimagining Capitalism in a World on Fire.
He discussed the three unprecedented crises simultaneously colliding:
- A global health crisis;
- A global economic crisis; and
- An increasingly global call for social and racial justice
Each of these crises, he argued, has implications on how the legal profession can address issues of racial justice.
Professor Wilkins explained that we should first put these crises into the historical context of trends that began reshaping the legal market before 2020. Following the 2008 housing crisis and recession, a shift began with regard to how consumers interacted with financial institutions and corporations for their economic needs. This combined with the forces of globalization from the Global North to the Global South and the speed and sophistication of technology have led to a fundamental restructuring of markets.
As such, challenges for business, and their lawyers, arose around threats such as cybersecurity, data privacy, anti-bribery, safety and catastrophic risk. These challenges have been met with an increase in new laws and regulations. “There has been an exploding of new law around the world – almost none of it clear or consistent.” More than ever, he explained, clients need lawyers who understand how to integrate law into a wider business solution around corporate governance and accountability.
From Shareholders to Stakeholders
In 1970, Milton Friedman famously declared “The social responsibility of business is to increase its profits.”
Professor Wilkins noted that even before the pandemic and this summer’s protests for racial justice, Friedman’s presumption had been “dramatically upended.” In 2018, CEO Larry Fink of BlackRock, the world’s largest asset manager, declared they would look beyond the bottom line to invest in businesses that contributed to society and, in 2019, the Business Roundtable of US CEOs amended the definition of the “purpose” of a corporation to include duties to all stakeholders, including customers, employees, suppliers and communities. In January 2020, Fink went further and said BlackRock would stop investing in companies that present a “high sustainability-related risk.”
By highlighting deep structural inequalities in everything from healthcare to employment, COVID will only accelerate this trend, explained Professor Wilkins. After a summer of protest that spread from the US to Europe and increasingly around the world, “it is now clear that racial and social justice must be a part of this broader sustainability agenda.”
Corporate America Speaks Out
Tim Wilkins picked up on his brother’s theme of multi-stakeholder pressure and the move away from shareholder-primacy. He explained, “The clearest articulation of this principle can be found in the corporate announcements made following the tragic killings of George Floyd, Breonna Taylor and other Black men and women while in police custody.”
Freshfields conducted research of each of the statements made by the Fortune 100 companies and a number of leading financial institutions. The firm found that these statements suggested a new approach to their internal and external initiatives that reflected the macro-trends highlighted by Professor Wilkins.
Tim Wilkins discussed the five key stakeholders in turn:
Agreeing with his brother, Tim Wilkins noted that Larry Fink had become the $15 trillion elephant in the room and emphasized the importance to the investors of diversity, including the need to collect data on “how each company serves its full set of stakeholders, such as the diversity of its workforce.”
Investors saw that companies with strong ESG ratings outperformed other companies during the pandemic due to the stability of their supply chains and the loyalty of their customers and employees. Accordingly, companies like Alphabet, parent to Google, deployed novel financial instruments to tap investor appetite by launching a $5.7 social impact bond, with $175 million of proceeds specifically targeted toward financing small businesses in Black communities. The financial investment firm, Legal & General, added its voice across its core portfolio by stating that it would not vote to recommend a director on a FTSE 100 or S&P 500 company if those companies did not have at least one Black, Asian or minority ethnic director by January 1, 2022.
Tim Wilkins next highlighted that companies are often quickest to respond to consumer demands and pressures. There is a continued trend of younger generations being more vocal about what they want from a company and they are harnessing their buying power, which is currently estimated to be $1.4 trillion for millennials and $143 billion for Gen Z by 2023. Similarly, the buying power for Black Americans is predicted to reach $1.5 trillion, giving these groups collectively a consumer power that cannot be ignored. For these consumer groups, the origin story of products is fundamental to their buying decisions, such as whether companies have Black leadership and widely use Black-owned suppliers.
As such, not surprisingly, Freshfields found that 100% of the consumer-facing companies in the Fortune 100 had launched an initiative around racial justice and equality.
Donations to social justice initiatives have increased several fold this summer but those sums are dwarfed by the trillions of dollars spent by business on procurement each year. Tim Wilkins noted that if companies increased their average spending on procurement by even a small percentage to Black-owned businesses, there would be a much greater transfer of lasting wealth. A McKinsey study, Covid-19's effect on minority-owned small businesses in the United States, showed that small black-owned businesses were hit particularly hard during the pandemic—where they already had limited cash reserved and business models that depended heavily on in-person customers. Several companies proposed to address this issue, such as Coca-Cola, who announced that it would increase spending on Black-owned enterprises across its supply chain by at least $500 million.
This trend is likely to increase, picking up on the macro-trend outlined by Professor Wilkins, because of the need to localize supply chains during the pandemic and thereby increase the need for smaller and diverse suppliers, including those in communities of color.
Employees are holding more power now than ever. Tim Wilkins pointed out that in recent years employees have demanded that their employers recognize education and health inequities facing people of color. Employees are now willing to mobilize, whether by leaving a company that does not take an interest in racial or social justice or by speaking up and staging walk outs. This includes making their voices heard on influential digital platforms such as Twitter, Facebook and LinkedIn. There has also been a big push by employees to create a pipeline of candidates for both entry level and senior positions. As discussed by Tim Wilkins and Annette Byron in an earlier blog, Business as Unusual: Will the pandemic lead to a lost generation of diverse talent?, the pandemic raises the very real risk of a lost generation of diverse talent unless businesses take affirmative action.
Tim Wilkins described that a number of the Fortune 100 companies in the Freshfields survey announced targets for diversifying their workforces in general (e.g., Johnson & Johnson and JPMorgan Chase) and specifically with respect to senior leaders and representation on their Boards (e.g., Wells Fargo, Dell Technologies, Google and Microsoft).
Increasingly, companies are beginning to understand that the communities in which they work must be thriving in order for their businesses to achieve continued success. In response, they have made commitments to: (i) education, such as pipeline initiatives in primary schools and donations, for example by MetLife, Amazon, and Anthem to historically Black colleges and Universities (“HBCUs”); (ii) health and welfare, focusing on promoting food security in minority communities and removing barriers to healthcare (see initiatives by CVS and Walgreens); and (iii) supporting front-line racial justice organizations such as the NAACP Legal Defense Fund and Equal Justice Initiative (see initiatives by General Motors, JPMorgan Chase, and Albertsons, among others).
Responding to the Challenge in the Legal Profession
Professor Wilkins next examined how the legal profession, in particular, could respond to these challenges.
He explained that the legal profession is a very traditional field with very traditional practices. It was once built upon an outdated concept of meritocracy that dated back to Erwin Smigel’s infamous 1969 call to Wall Street firms to recruit “men who are Nordic, have pleasing personalities and clean-cut appearances.” See, Smigel, Erwin O. The Wall Street Lawyer : Professional Organizational Man? ( University of Indiana Press, Bloomington, 2nd ed., 1969)
Professor Wilkins noted that the current crises in the world as well as generational changes are working to dismantle and restructure these traditional practices. Millennials and Gen Z, members of which are known to have a commitment to purpose and meaning, make up 38% of the workforce and by 2030, will make up 58% of the workforce. Because the legal profession will only continue to face disruption, its ability to survive will depend upon a commitment to a core public purpose and a commitment to diversity. Since 2009, Black law firm associates have fallen from 4.6% to 3.9% and in 2019, seven of the largest 100 firms had no Black equity partners and twenty of the largest 100 firms only had one. Similarly, even though women have made up more than 40% of entering associates since 1986, they make up less than 20% of partners and there have been only modest gains in the numbers of Asian and Latinx partners.
Professor Wilkins explained that law firms have responded to their clients with 99% of them launching at least one new antiracism and/or diversity, equity and inclusion initiative.
However, many clients have made clear that they will continue to monitor closely, for example Kim Rivera, General Counsel at Hewlett Packard Inc., announced in 2017 that law firms would have 10% of their fees withheld if they did not meet diversity targets.
“The pandemic and the protests will only increase these efforts as companies face mounting pressure both externally and internally,” said Professor Wilkins. Law firms’ success at achieving diversity will be part of the overall supplier calculation that companies will assess to measure whether they remain on target for their broader sustainability agendas.
What are the Best Practices?
Given the challenges for business and legal institutions to create a lasting impact, Tim Wilkins then turned to the current best practices offered in the market.
Quoting Darren Walker of the Ford Foundation, he explained that it is now clear, the old playbook is not working. Throughout the last few years, and in particular this past year, more is and should be demanded from corporations.
Tim Wilkins explained that businesses must take into account multi-stakeholder concerns and adopt a new playbook of the “Four P’s” of best practices (See also his previous blog on “What role should business play in the battle for racial justice and equality?”)
Power of the Purse
Corporations should move from a “donation only” model to one of investment that builds wealthy and equity in communities of color. He cited several models where recent investment pledges offer an opportunity to build credit and economic power. For example, Bank of America made a pledge of $1 billion over four years to communities of color. Coca-Cola has also pledged to invest over $400 million worth of initiatives over five years to uplift black communities. Microsoft, focusing on its supply chain, committed to double the number of Black-owned suppliers over the next three years and spend an incremental $500 million on those existing and new suppliers. This injection of capital directly into communities of color can create opportunities for the creation and transferability of generational wealth.
Power of the Pulpit
Corporations can use their wide-reaching influence and voices to help amplify the voices of people of color. They can do this by making changes to advertising and marketing, sharing platforms and restricting negative voices. Examples of how this has started to play out include changes to logos such as the “Aunt Jemima” brand that have roots dating back to slavery, the creation of the “Queen Collective” program by Procter and Gamble in order to provide a platform for filmmakers of color to tell important stories about issues directly affecting their communities and Snapchat’s commitment to restrict any user who attempts to incite racial violence.
Power of the People
In order to move forward in a meaningful way, business must broaden its investment in people. The best practices suggest this include setting targets for hiring and promoting people of color and placing people of color on boards and in senior management positions. Corporations such as Wells Fargo, Dell Technologies and Google have made commitments to increase black leadership to certain measurable numbers in the next 5-10 years. These quantifiable metrics enable investor and other community stakeholders to hold companies to account for any failure to meet their targets and reward them for exceeding them.
Power of Practice
Lastly, business should consider how their practices affect and influence communities of color and how to work to dismantle any negative effects. This would include incorporating diversity into core business practices, eliminating marketing strategies that depend on stereotypical images and removing products and services that have implicit bias built into the software. Positive examples include the sharing of shelf space by retailers with minority-owned businesses, such as Sephora which pledged to dedicate 15% of their shelf space, and the postponing of launches of facial recognition software by Amazon and IBM that could misidentify people of color.
A fad or hope for the Future?
The Wilkins brothers concluded by remaining cautiously optimistic. Many corporations and law firms have now taken a stance in support of racial and social justice, whether it is through donations to front line social justice organizations, pledges to increase Black leadership or injections of money and resources into communities of color and Black-owned businesses. In the coming months and years, stakeholders will have to continue to work to hold these institutions accountable to their promises in order to effect lasting change. And, as Professor Wilkins, concluded, we each individually have a part we can play—and must play.