By Hua Wang

New research shows that how law firms distribute billing origination credit and compensation affects the advancement of women lawyers to positions of real power and influence in their firm. What steps can law firms take to develop fair and equitable compensation, origination credit, and client succession policies that will help drive gender balance at the top ranks?

As women lawyers become more senior, they experience an increasing shortfall in income compared to male attorneys, and firms see higher attrition rates of women senior women lawyers. Despite commitments to build a more gender balanced senior echelon at law firms, women represent only 16% of equity partners nationwide. These lawyers hold an ownership interest in their firms and occupy the most prestigious, powerful and lucrative positions.

The underrepresentation of women among law firm equity partners means fewer women on compensation committees, which research shows, impacts the compensation of women across the board. According to the 2010 American Bar Association survey study “New Millennium, Same Glass Ceiling” [PDF] of nearly 700 women law firm partners, about half of the respondents had one woman on the committee. One-fifth had none. Another fifth had two women. When women are not part of the dialogue and the decision-making body that charts the future direction of firms, the chances are greater that the policies and practices implemented will be less responsive to the career needs of women lawyers.

Why Compensation Matters

According to the survey, the top three factors for compensation decisions or promotion to equity partner are: revenue collected, billing origination, and billable hours. Individual cash flow metrics weigh heavily, while institutional investments, such as contributions to the firm’s human capital and associate development, are given little weight. The underweighting of institutional investments has a particularly deleterious effect because women, especially women of color, are often expected to make more institutional investments than men. These non-billable contributions help build a strong firm culture and should be both recognized as valuable and taken into account in compensation decisions.

Seventy percent of respondents say there was either no woman or only a token woman on the compensation committee, and the lack of female representation led to implicit bias. Research shows that a token woman on a committee of men negatively affects both the woman herself and her ability to influence decision-making.

People automatically prefer people like them. They feel more comfortable with them, remember their positive traits while forgetting their negative ones, and favor them in distributing rewards. Men are thus often given the benefit of the doubt. It is thus important to be in the inner circle, to know and be known. While not all white men are in the “in crowd,” they are more likely to have political relationships with powerful partners. In-group favoritism can have a profound effect on who gets access to the necessary information through their informal networks.

Taking Credit

As for origination credit, 55% of respondents said they had been denied their fair share of origination credit. Minority women partners were more likely to participate in successful client pitches, but not receive origination credit. In all top firms, the expectation of topnotch legal work is completely assumed to such a degree that client management becomes the differentiating factor in evaluations. Women partners’ compensation is negatively impacted by their exclusion from rainmaking opportunities and a proportionate share of the financial rewards associated with successful client pitches. One respondent said, “Women are not groomed in the same way men are at the firm for business development… You have to be in the boy’s club to get the origination, which is really the way power is measured at the firm.”

Thirty percent of respondents reported that they had been subjected to intimidation, threats or bullying when they challenged the allocation of origination credit. The lack of credit for rainmaking adversely affects the prospects of women for firm leadership and compensation. Origination credit and compensation criteria must be transparent so that women lawyers know exactly what they need to do to reach certain compensation levels.

The emphasis on billable hours leads to the hoarding of work, with the consequent failure to match work to the attorney and the relevant skill set, as well as who can provide high-quality legal work in the most cost-efficient fashion. Moreover, the most-hours-wins approach puts female partners at a disadvantage, since most married female partners have working husbands. In contrast, most male partners have stay-at-home wives who can take care of household chores and bear most of the childrearing responsibilities.

The lack of objectivity and transparency in existing law firm compensation systems means most of the negotiation surrounding origination credit occurs out of sight. In a profession in which 90% of women lawyers report having encountered gender discrimination (according to research by Mary C. Noonan, Mary E. Corcoran & Paul N. Courant), it is not surprising that many talented and educated women lawyers leave large firms to work in-house, at smaller law firms, or exit the legal profession entirely.

The creation and implementation of fair and equitable compensation systems is crucial to maintain gender balance in the profession, which in turn will increase the percentages of women in the equity partner ranks and law firm leadership.