Wal-Mart s Waters. The diversity efforts of Wal-Mart Stores Inc. the nation s

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1 Wal-Mart s Waters The nation s biggest retailer has literally changed the face of its legal department and its outside law firms with its diversity initiatives. The diversity efforts of Wal-Mart Stores Inc. the nation s biggest retailer are the legal professional s equivalent to Neil Armstrong walking on the moon: They are a giant leap for all lawyers of color, according to Martin R. Castro, a relationship partner at one of Wal-Mart s top outside firms, Sonnenschein Nath and Rosenthal LLP. Castro, a Mexican American from the firm s Chicago office, says that what distinguishes Wal-Mart s diversity effort is that, This is not just a call to action. It is action, and actions speak louder than words. 28

2 shed Moment By Melanie Lasoff Levs Photo by Felix Sanchez Wal-Mart s actions on the diversity front include an overhaul of both its in-house legal department and its top 100 law firms to greatly increase the number of minority and women attorneys working on Wal-Mart business. The efforts of Wal-Mart s legal division have been lauded by both law firms and diversity organizations. In February, Wal-Mart was named MCCA s South/Southwest region Employer of Choice for its initiative, which has literally changed the face of law at Wal-Mart and within the law firms that work for it. continued on page 30 Wal-Mart s Legal Eagles: (Sitting, L to R): Tom Evans, Karen Roberts, Toya Haley, and Yoon Chang. (Standing, L to R): Kenneth Oh, Mike Spencer, Anne Mourney, and Luis Artime. 29

3 Wal-Mart s Watershed Moment continued from page 29 Filling the Pipeline How did Wal-Mart do it? The approach is multi-faceted, according to P. Alex Vasquez, an associate general counsel who manages the company s diversity efforts. First steps involved increasing the numbers of minority and women attorneys within the legal department. When Thomas A. Mars, senior vice president and general counsel, arrived at the company in early 2002 and was promoted to his current position that May, the department employed about 56 attorneys. According to Vasquez, only six were attorneys of color and 20 were women. Susan Klooz, vice president and general counsel of the employment practices division, had been an advocate for diversity prior to Mars arrival and had been networking within racial/ethnic minority bar associations and other diversity organizations. In 2003, Mars realized its legal department needed expanding to keep up with the increased workflow and company growth. Klooz encouraged Mars to attend some events to search for new talent as Wal-Mart sought to increase the size of its legal department. I realized that the diversity organizations we had access to contained a pool of talent that was at least equal, if not superior, to talent we could find elsewhere, Mars explains. As he made his rounds to conferences and events, Mars says, It wasn t long before we had filled our pipeline with so much talent that we could actually pick and choose among very qualified lawyers. The larger pool of qualified candidates allowed us to maintain and actually increase our high standards. Wal-Mart was able to recruit attorneys from law firms, other major corporations, and even those in government positions such as presidential appointee J. P. Suarez, who had been director of enforcement for the Environmental Protection Agency and now serves as senior vice president of asset protection and compliance for Wal-Mart. (Suarez is also an MCCA board member.) Today, Wal-Mart s legal department includes about 130 attorneys, 27 percent of whom are attorneys of color and 42 percent of whom are women, says Vasquez, who was recruited in March 2003 from his position as a commercial litigation attorney in Dallas. Michael Bennett, with whom Vasquez was in private practice, joined Wal-Mart s legal team in commercial litigation and brought Vasquez to the company. After two years, Vasquez began working with Mars and Samuel M. Reeves, another associate general counsel who focuses on outside counsel management, and Kerry Kotouc, an attorney who directs attorney recruiting for the legal department. Within 10 days of Vasquez and Kotouc beginning work on diversity initiatives and recruiting, they and several other inhouse attorneys attended an MCCA dinner in Dallas. They stayed an extra day to conduct interviews arranged by Kotouc with the assistance of minority bar associations there and ended up hiring three attorneys, Vasquez recalls. We immediately created that connection between the diversity program and recruiting, he says. We were seeking top talent and that is how we were able to find it. In 2005, legal department attorneys attended 45 diversity events across the country, says Vasquez. While participation in We immediately created that connection between the diversity program and recruiting. We were seeking top talent and that is how we were able to find it. P. Alex Vasquez the events is voluntary except for heads of departments, about 120 attorneys attended at least one and some attended more, leading to more than 300 appearances. We even have a waiting list, he explains, adding that attorneys are encouraged to submit requests for the top three events they want to attend. While having a diverse staff represents the variety of the world, Mars says that was not his ultimate goal but an added bonus. The real reason for diversifying Wal-Mart s legal department was simpler, he explains. We found ourselves looking for ways to build a world-class legal department, says Mars. While Mars had met with consultants, headhunters, and others to recruit, something was lacking. Fortuitously, I was introduced to diversity organizations through Klooz at about the time I was starting to worry a lot about how we were going to attract the talented lawyers who would be a good fit for Wal-Mart. The rest is history, says Mars. We ended up developing this recruiting pipeline and in the process, ended up recruiting lawyers who have a better and broader range of experience, better academic credentials, and people who are a better cultural fit than we would ve been able to find anywhere else. The process of recruiting through minority organizations also was cost-effective, Mars adds. We spent a lot of money traveling, networking, and contributing financially to those organizations and it has paid off. The amount we spent was far less than what we would have paid professional recruiters. Establishing Accountability Wal-Mart s legal department next turned to its law firms. Reeves had discovered that of the top 100 law firms working with Wal- Mart, 82 of the relationship partners were white males. When Reeves was selected to manage the company s outside counsel in June 2003, Mars explained to him the push for more diversity. As Reeves attended diversity conferences and ethnic minority organization events, he says, It became apparent to me that while we were hiring all the good talent out there, our law firms weren t understanding or appreciating how important this was. At those minority attorney events, Reeves says, participants discussed a consistent theme: lack of accountability with law continued on page 32 30

4 Wal-Mart s Watershed Moment continued from page 30 Nobody was telling law firms, You re not going to get our business anymore if you don t meet our diversity expectations. What we were telling law firms is, We really want you to do this. Samuel M. Reeves firms. Nobody was telling law firms, You re not going to get our business anymore if you don t meet our diversity expectations. What we were telling law firms is, We really want you to do this. Last June, to drive accountability and establish expectations for law firms, Reeves and Vasquez sent an extensive questionnaire to the top 100 of the company s approximately 250 law firms. Many of the questions were basic metric stuff based on Sara Lee General Counsel Roderick Palmore s Call to Action: the total number of attorneys at the firm, how many were minorities, how many were women, and how many associates and partners were minorities. The questionnaire asked for historical data, such as attrition rates among various minority groups. The firms also had to answer questions about their diversity efforts, leadership philosophies, and culture, and submit three to five names of attorneys including at least one minority and one female who could serve as relationship partner for the firm. The current relationship partner could be included in the list. After combing the results into the early fall, Mars and his team made some decisions: They chose 40 new relationship partners who were minority or female attorneys, representing a shift in $60 million of the company s $200 million outside counsel legal business. Mars says he also ended the company s relationship with two law firms for failure to meet diversity requirements. According to Mars, the diversity evaluation also got the attention of the white male partners. Those white male relationship partners who survived the process are much more focused on diversity than they were before we started this process, he says, adding that white males stayed on as relationship partners if their firms already had strong diversity initiatives. You see a much more energized group of relationship partners we ended up with 100 very motivated and focused diversity-oriented lawyers representing different ethnic groups. In September 2005, Wal-Mart held its first Legal Diversity Conference, inviting all relationship partners including the 40 new ones to its Bentonville, Ark., headquarters. Also in attendance: Wal-Mart s entire legal department and representatives from legal organizations such as the Hispanic National Bar Association, the National Association of Women Lawyers, MCCA, the National Asian Pacific American Bar Association, the National Native American Bar Association, and the National Bar Association. We laid out our expectations and answered questions, Vasquez recalls. We re expecting a lot from our firms, but we re doing our part to make sure they understand what our expectations are. Those expectations include being responsive, keeping costs down, and making sure diverse attorneys partners and associates are working on Wal-Mart legal matters, according to Reeves. Those firms who exceed their performance, cost, and diversity expectations will be given priority status for additional Wal-Mart business and, beginning in 2006, they will be recognized through full-page advertisements in national legal publications. Mars believes that hard work on diversity is as important as results. We make it clear that anybody can be successful in this program, he explains. Our program focuses on good-faith efforts, and we believe good-faith efforts will lead to results. Good faith, Vasquez explains, begins with participating in events listed in Wal-Mart s Diversity Alert s (a memo posting from Reeves and Vasquez listing the events that Wal-Mart will participate in each month) and financially supporting minority bar associations and organizations. We say, Don t just send a check and purchase an empty table at an event; get out of the office and participate, says Mars. We think that leads to results, further interest, and better retention in their firms. Stepping Up So far, firms have complied. Mars says he and others in the legal department receive and calls almost daily from law firms telling them about their successes and discussions. This year, he plans to ask all of the company s outside firms to participate in the questionnaire, which the Wal-Mart legal department plans to issue annually. Joan Haratani, relationship partner for Wal-Mart at the San Francisco office of Morgan, Lewis & Bockius LLP, says her firm has been glad to participate. We stepped up to the plate, she says. The firm s management immediately wanted to make sure their commitment to diversity was communicated in an effective way, and they did that by making me the relationship attorney. Haratani, a Japanese American, was awarded the position last fall. She says that by making her the relationship partner, Wal- Mart is showing the next generation of minority attorneys they have a future. It s great to show leadership to younger people by showing them that a person who looks like me can also be a person who has a considerable amount of clout because he or she has been designated as the relationship attorney, says Haratani, 32

5 who also is president of the Bar Association of San Francisco, the first female of color to lead the group in the organization s 134 year history. Like that new position, being relationship partner for Wal-Mart is a natural progression. For a lot of relationship partners being designated because of Wal-Mart s diversity efforts, it s not that they are first in ability, but they are first in time, Haratani notes. As stated by Haratani, having a diverse relationship partner benefits all parties the law firm, the attorneys, and the client. People of different backgrounds can approach legal issues from different points of view, and that brainstorming and synergy always results in a better product, she says. The whole is always greater because you have the conversations, the challenges, the different points of view to work through to get to the end. Jesse Ruiz, Wal-Mart relationship partner at Gardner Carton & Douglas since the firm recieved the business in March 2003, agrees. The attorneys representing them should look like a cross-section of the society they serve as well as their client and employee base, he says. You arrive at better solutions to problems when you have a diverse set of thinking and the way to get to that is with a diverse set of lawyers. Ruiz s firm already was at the forefront of diversity, he says, citing his role as relationship partner for Wal-Mart from the beginning. He says he is glad a client also is taking the lead. I m thrilled I m working with a client that has taken up the issue of diversity in the legal profession and is a champion in it, adds Ruiz, a first-generation Mexican American in the firm s Chicago office. It s great when clients help you achieve things that are important to you as well. Diversity also has always been important to Ava Lias-Booker, Wal-Mart s relationship partner at McGuireWoods LLP. An African American, she brought colleague Don Rea to her firm last April and he, in turn, brought the Wal-Mart business. Now both of them work on Wal-Mart matters from the firm s Baltimore, Md. office. I ve watched the issue and the impact of diversity grow over time, but for many years, it was more lip service, says Lias- Booker. For a major company like Wal-Mart to come in and say, We re not just going to talk the talk but we re going to walk the walk was refreshing and rewarding. At a recent legal diversity meeting in Chicago, Lias-Booker says she met other Wal-Mart relationship partners. It was a very different room than it would ve been five years ago or even a year ago, she says, citing the various ethnic minorities and women represented. Other corporate representatives there discussed following Wal-Mart s example, she says. My hope is that this is something every company will sign up and do. Law firms will change fastest when their clients demand that change. Adorno & Yoss LLP is one firm that kept its white male relationship partner because of the firm s already strong commitment to diversity. Founded in 1986 by Cuban-born Henry Adorno, the firm is the largest minority-owned firm in the country, says Gregory A. Victor, who became Wal-Mart s relationship partner in fall 2004 when a former colleague introduced Victor to They may be doing very well in terms of performance and cost, but they need to do a lot more to be more aggressive and move faster on diversity, or they won t be with us this time next year. Thomas A. Mars a member of Wal-Mart s legal staff. We were a perfect fit with Wal-Mart and their diversity initiatives, says Victor. By focusing on their own internal diversity, as well as helping firms through Diversity Alerts and other support, Wal-Mart is showing its outside counsel how to make their own changes, Victor adds. Wal-Mart speaks with a very powerful voice in the corporate and legal communities, he says. They re getting their message across. These are not just empty words. Tom Mars at Wal-Mart agrees. This year, he says, he would like to grow the legal department by as many as 20 attorneys and will use similar techniques to keep its diversity numbers high. Last year, he says, 25 attorneys were hired, and 68 percent of the new hires were minorities and 48 percent were women. As far as outside counsel, Mars says his team plans to continue monitoring its law firms to make sure they comply with Wal-Mart s diversity initiatives. He says five firms are in jeopardy of losing Wal-Mart s business due to their track record on diversity. They may be doing very well in terms of performance and cost, he says, but they need to do a lot more to be more aggressive and move faster on diversity, or they won t be with us this time next year. Wal-Mart is offering the legal industry as well as corporations, law firms, and individual attorneys a challenge to step up to the plate, says Martin Castro of Sonnenschein Nath and Rosenthal LLP. What Wal-Mart is attempting to do here is create a sea change in diversity initiatives within the legal profession, he concludes. Wal-Mart truly is a role model. DB Melanie Lasoff Levs is a freelance writer based in Atlanta, Ga. 33