(Top to Bottom): Manuel Sanchez of Sanchez Daniels & Hoffman; Francisco Gonzalez of Adorn & Yoss; and Stephen H. Pugh of Pugh, Jones, Johnson & Quandt, P.C.
All photos by Geoff Butler
In the quest for an inclusive workplace, some large corporate law departments now require the law firms that serve them to utilize diversity plans and ensure that women and minority attorneys work on their accounts. But do these requirements really make a difference? Recently, Diversity & the Bar® magazine sat down with Eaton Corporation, an industrial manufacturer with 60,000 employees, to learn how this company turned its diversity requirements into strong partnerships with the law firms that serve it. It found that not only did Eaton benefit from its diversity initiatives, but the desire to work with women and minority attorneys created a chain reaction that benefited inclusive law firms across the country.
Eaton Corporation is a $12.4 billion diversified industrial manufacturing company with four key business groups: the fluid power group, which makes systems for aerospace and on- and off-highway stationary equipment like hoses and hydraulic equipment; the electrical group, which focuses on power distribution and control products and services and manufactures household items like circuit breakers; the automotive group, which includes automotive components like engine valves; and the truck group, which manufactures systems for fuel economy and truck safety.
With facilities in the U.S., Canada, Brazil, Mexico, and Asia, and sales to over 125 countries, company leadership was looking for ways to expand diversity initiatives to include its legal providers, or, to use the business parlance, its legal vendors.
Mark McGuire, General Counsel, Eaton Corporation
To that end, Vice President and General Counsel Mark McGuire tasked Lisa D. Sutton and Bill Hogsett, attorneys in Eaton Corporation’s law department, with leading the department’s supplier diversity efforts to identify, retain, engage, and promote the use of diverse “legal suppliers.”
“In the Eaton law department, we consider the law firms we engage to be part of our team, so our diversity efforts naturally extend to our external counsel,” says McGuire. “I am extremely excited about our efforts to promote diverse law firms because it’s the right thing to do to ensure success on many levels.”
Diversity practices within the company are not a new enterprise. Eaton has maintained a supplier diversity program headed by a fulltime director since 2001, and had created a policy that emphasized a belief that both the company and the community equally benefited from providing equal opportunities for the minority- and women-owned enterprises that were competing for Eaton’s business, according to Sutton.
“Our senior management is responsible for encouraging and fostering an operating culture that makes these opportunities available. In fact, it is one of the metrics by which each of our operations and corporate functions are measured in support of the overall goal,” notes Sutton.
Sutton explains that the company goals for 2006 are to utilize minority- and women-owned suppliers for 10 percent of its U.S. purchases, and to increase its utilization of minority- and women-owned business services, including outside legal services.
“What has been beneficial for Eaton and the law department in particular is that there is unquestionably a commitment to engage and promote utilization of diverse legal vendors,” says Sutton. “It is ingrained in our culture and engrained in our goals that we are going to measure our progress on diversity, and we have accountability and expectations whether we are measuring the certified firm component or the non-certified firms.”
While Eaton’s own legal department currently has 46 attorneys, Sutton points out that the scope of the company’s legal matters creates opportunities for outside law firm work that is as rich and varied as the business itself and includes environmental regulatory issues, waste disposal site representation and compliance support, general corporate law issues, acquisition/divestiture support, litigation, and intellectual property support. Under the mandate set by McGuire, the company sought to ensure that outside diverse firms were provided with the equal opportunity for Eaton legal work.
“At Eaton, we believe that diversity is key to our success and competitiveness. Our respect for and commitment to diversity is written into our Code of Ethics, and we aspire for it to be in our DNA,” adds McGuire.
To implement its diversity goals, Eaton identified and established a list of qualified certified minority- and women-owned law firms and made the list available on the company’s internal website for all functions within the law department. The potential law firms were researched and vetted by conducting interviews and studying the practice profiles.
“The second step,” says Sutton, “is to retain those firms if the program and the project fit.”
That is where the Miami-based legal firm Adorno & Yoss, LLP—the largest certified minority-owned firm in the United States—came in.
Francisco J. Gonzalez, Adorno & Yoss’ director of national clients service group, says, “We came to Eaton through their diversity program, and the legal department embraced us.”
Gonzalez, who functions as the relationship partner for his firm, says he was approached by Eaton and asked about the firm’s qualifications in mergers and acquisition work, and whether the firm could handle a strategic divestiture of assets in the state of Illinois. “When they first gave us the assignment, I was flabbergasted and thought, ‘This is an incredible breakthrough.’ ”
Lisa D. Sutton, Senior Attorney, Eaton Corporation
Since time was of the essence, Adorno & Yoss moved swiftly to put the deal in place. Gonzalez is quick to point out that this was a sophisticated transaction that required first-rate legal acumen, because the divestiture itself was less than straightforward. “It had some wrinkles,” says Gonzalez. “This was a sale of assets that were part of an ongoing operation, so we had some ERISA issues and real estate issues. So, there was a need to perform sophisticated due diligence and documentation in the context of a transaction in 75 days.”
“We felt confident that we could deliver the services regardless of where the assets were or where the transaction was going to take place,” continues Gonzalez. But, an additional element of the deal, says Gonzalez, was that the legal work was centered in a jurisdiction where Adorno & Yoss did not have its own law office. So a critical component to its success was the alliance with The National Minority Law Group (NMLG) and two of its members—the Chicago offices of Sanchez Daniels & Hoffman LLP, and Pugh, Jones, Johnson & Quandt, P.C.
Along with the attorneys from Adorno & Yoss, Sanchez Daniels & Hoffman performed the ERISA work and Pugh, Jones, Johnson & Quandt, P.C. handled the real estate issues. Together, the firms worked with in-house attorneys from Eaton on the Illinois strategic divestiture deal through its completion in July 2006.
“The opportunity to participate in this significant piece of legal work for Eaton would never have occurred but for the NMLG alliance. We were able to seamlessly work with the in-house attorneys at Eaton to successfully complete this divestiture deal,” notes Manuel Sanchez of Sanchez Daniels & Hoffman.
Strategic Alliance
The NMLG is an alliance of 16 certified and AV-rated, full-service minority-owned law firms that was founded in 2003, and, according to Gonzalez, is the wave of the future for the advancement of minority and women attorneys who want to be engaged in sophisticated legal matters with large corporate clients.
Over time, the alliance grew and transformed into what it is today. “The NMLG came about as a result of the fact that Adorno & Yoss wanted the ability to serve clients on a national basis, so obviously we had to go out there and get geographical coverage.” But, Gonzalez adds, “We believe in the business case for diversity.”
Deborah R. Pickens, Diversity Director, Eaton Corporation
The firm initially accomplished this goal by mergers with other firms across the country.
“Still, there were areas we could not cover, and opening an office is an expensive proposition. So we went out and performed substantial due diligence to locate minority-owned law firms that concentrated on corporate defense,” Gonzalez continues.
This search led to the identification of approximately 20 qualified firms, and the creation of a website that identifies women and minority lawyers with specialty practices in particular geographic areas. NMLG brings together more than 500 attorneys who are all members of AV-rated, minority-owned law firms located in major metropolitan areas.
The member firms include Atkins & Evans; Blackwell Igbanugo P.A; Brown & Hutchinson; Brown & Sheehan; Escamilla & Poneck, Inc; Fields & Brown; Fitzhugh, Parker & Alvaro; Gonzalez, Saggio & Harlan, LLP; Greene and Letts; Lafayette & Kumagai LLP; Lewis & Munday, PC; Pugh, Jones, Johnson & Quandt, PC; Sanchez Daniels & Hoffman LLP; Wilson Petty Kosmo & Turner LLP; and Wong Fleming PC.
Collective Improvement
With the legal alliance model in place, the attorneys at Adorno & Yoss sought to take it to an even higher level and called a meeting with several general counsel of major corporations, including Allstate, Wal-Mart, American Express, Shell Oil Company, McDonald’s Corporation, and General Motors, to comment on the positive and negative aspects of the planned alliance.
One of the critical tools that the meeting identified was the ability to search for AV-rated minority lawyers anywhere in the country, according to Gonzalez. Gonzalez and the other members of the alliance addressed that need by the creation of the NMLG website, which highlights the firms, their practice strengths, and the members of their respective legal teams.
This has proven to be a success with the members of the alliance as well. Hugo Chaviano, a partner in the Chicago office of Sanchez Daniels & Hoffman LLP, says that an alliance with Adorno & Yoss and Eaton was a “creative way of bringing work that may traditionally go to other types of law firms to minority-owned and controlled entities. Here we have specific expertise that was able to be utilized with regard to this assignment.”
Other members of the alliance agree that the recognition they are getting is well-deserved and of benefit to all. “If other clients would follow Eaton’s example and hire lawyers in our National Minority Law Group, those clients would really be pleased with our level of responsiveness and quality of representation. Pugh, Jones was hired because we were recommended by Adorno & Yoss who knows that every law firm in the National Minority Law Group is certified by the organization to perform at a very high level,” states Stephen H. Pugh, president and partner at Pugh, Jones, Johnson & Quandt, P.C.
In addition, Chaviano says, “Working with Adorno & Yoss provides a national platform for us to market ourselves to national clients whom we would otherwise not have the platform for, as well as deepening our bench with resources to handle those assignments.”
While there is strength in numbers reflected in enhanced clout, more resources, and geographical and practice coverage, the challenge that comes with this type of alliance, according to Gonzalez, is the reality that the alliance is as weak as its weakest member.
“This means one, when I call you and say we have a matter, you have to respond to me just like my partner next door, and two, if you do not have the capabilities [to perform the required legal services], you tell me,” says Gonzalez.
Asked about whether there is room for improvement, Gonzalez is frank in stating that there is not enough legal work available in certain parts of the country. While the alliance is a win-win situation for many of the NMLG attorneys, there are others who are not receiving the amount of work that they were expecting.
—Mark McGuire
“But, we are getting there,” adds Gonzalez. “People are beginning to see NMLG as a valid resource for services on a national basis.”
“The fact that Eaton even thought about giving this transactional work to a firm outside of their traditional legal providers gives insight into their mindset,” Gonzalez points out.
Proving the Point
For Sutton, what has been effective in growing the law department diversity program was the appointment of internal advocates like herself and other colleagues who were able to get the information in the hands of the people making hiring decisions.
“Eaton has a vision that we constantly reinforce, that we want to be one of the most admired companies in our market. Our diversity effort perfectly aligns with that. And that is not just talk. It is reinforced with resources like our fulltime diversity director, Deborah R. Pickens, and from my end, management support of the law department’s diversity efforts,” says Sutton.
Pickens is responsible for implementing that vision with external resources such as the National Minority Supplier Development Council, the Women’s Business Enterprise National Council, and the National Association of Minority and Women Owned Law Firms. “The supplier diversity and law departments within Eaton work to proactively assess new minority and women-owned firms. Eaton’s progress in our diversity efforts is tracked and communicated monthly to senior management,” notes Pickens.
Gonzalez sees a parallel from the law firm perspective. “One of the challenges for a minority firm trying to work for a large corporation is that you get lost in the shuffle. In our case, the fact that we have an advocate and champion within the corporation who is adept at finding the opportunities and is acting as a clearing house of information. Lisa Sutton knows how we have performed with the different members of the legal department,” remarks Gonzalez. This, he says, allows real feedback.
Sutton notes that prior to the formation of minority and women-owned law firm alliances, the process of finding the appropriate counsel was not seamless.
“One of the challenges on the legal end was making sure that some of the legal specialties had competent and appropriate coverage,” notes Sutton. “Jurisdictional coverage is why Adorno & Yoss and the alliance with the National Minority Law Group has been such an asset for us. For a big company with operations in many states, it is hard to get that multistate coverage. The alliance has given us one-stop shopping.”
Success on this particular deal with Eaton may open the doors to other business opportunities for all the firms that are part of the alliance. The ultimate catalyst in the diversity process is having general counsel of large corporations get the message that there is a competitive advantage to hiring minority firms, as opposed to automatically returning to the traditional legal providers, explains Gonzalez.
Sutton concurs. “We are really excited about talking about this because we have been working very hard, and Adorno & Yoss has been great in trying to improve the traction and maintain the relationship so we can continue to provide our customer with a quality product.”
Gonzalez emphasizes the business case for diversity, saying these companies want to see firsthand that qualified women, minority, and disabled attorneys are actually working on their legal matters day in and day out, and are holding them accountable by asking firms to track the work by women and minorities.
“The key message here is that there are a number of large corporations that are advancing the hiring of minority lawyers and giving the attorneys meaningful opportunities,” says Gonzalez. The transition has been that over time, the assignments to NMLG attorneys are growing more sophisticated from the general counsel’s standpoint.
Sutton agrees. “This is not mere tokenism; it is a commitment to engage diverse legal suppliers on substantive and complex legal matters. It is not work for the sake of work; there are concrete examples, like strategic transactions and complex environmental and regulatory work.”
“Eaton is an example of a company that is going out there and putting their money where their mouth is,” says Gonzalez. “For us at NMLG, this is a great visible example of how a group of minority law firms that know each other well as a result of due diligence can work in a seamless fashion for our client. This is a situation a lot of us would not have been exposed to if we were not working together.”
In the end, Eaton was pleased with the work done by the law firms, says Sutton. “We have the same expectation that the women- or minority-owned law firms will deliver quality service. We also want to meet or exceed our customer’s expectations in that regard. Through our partnership with Adorno & Yoss, we were able to get the seamless legal support that we needed.”
McGuire believes that the results of Eaton’s efforts have been outstanding and continue to bear fruit. “For example, diverse firms that we initially hired for environmental work, like Adorno & Yoss, have also completed successful M&A engagements for us. I’m convinced we’ll find more synergies as we continue to expand the program,” he says. DB
Elisabeth Frater, Esq. is a partner at the law firm Gravett & Frater, LLP in Napa and a freelance legal writer.
From the March/April 2007 issue of Diversity & The Bar®