Can litigation finance help the gender pay gap?

This article by Aviva Will was first published on Bloomberg Law.

It’s tempting to respond with dismay to Major, Lindsey & Africa’s recent survey on gender pay differences in law, showing an astounding 44 percent difference in pay between female and male partners at big American law firms.

And I understand why many feel cynical about the prospects for closing this gap. The “good news” is that the gender pay is down from 47 percent in 2014—but at that rate, it will take almost 30 years to close the pay gap, and today’s women partners will be retired before equity is achieved.

Outrage and cynicism are understandable emotions—and all too abundant in this political season. But they don’t fix the underlying problem. I’d like to suggest a more pragmatic approach—one that will, I believe, help close the pay gap for women and men in law more quickly and decisively.

It boils down to a single word: Origination.

Origination is the necessary stock in trade for anyone, male or female, who wants to succeed in an American law firm. Bringing in new business is the basis on which promotion and monetary compensation are based.

It’s very simple: Rightly or wrongly, there is a direct link between one’s success as a rainmaker and one’s pay as a lawyer, and that is not likely to change any time soon. So if we want to close the pay gap in law, we should focus on helping women lawyers to be better rainmakers.

The research reinforces this. As Jeffrey A. Lowe of Major, Lindsey & Africa said, “We asked partners to pinpoint the factors underlying the pay differences, and the No. 1 factor was origination.”

So, what can we do to help women lawyers become better at origination—and close the pay gap?

First, we can start by understanding some of the legacy barriers women face, particularly at big firms. Among these is the practice of senior partners passing down their client relationships to the younger lawyers they mentor, who all too often look just like them. To fix this problem, law firm leaders need to commit, now and in the future, to ensuring that mentor relationships and client relationships are shared in ways that promote diversity. Further, as Faith Gay of Quinn Emanuel said in a recent interview, “Firms need to make it an ironclad priority to provide explicit business mentoring from first year through junior partnership for every attorney whether male or female. Otherwise firms are wasting very expensive assets.”

Second, clients can use the power of the purse to level the playing field for women. They already know it’s good for business: According McKinsey research, more gender diverse companies are 15% more likely to outperform less diverse peers. Diversity is among the criteria many large corporations use in selecting service providers, and there’s no reason they should not apply the same expectations to firms. Clients can demand that the law firms they use place women in the most senior relationship roles and have women leading their trial teams.

Forcing change through mentor and client relationships will produce results—eventually. But at the end of the day, it’s all about the money—and new tools are needed to help women bring in new business, the lifeline of any firm, more quickly.

To that end, the third thing we must do to help women be more effective in bringing in new business is to ensure that they are utilizing the right tools. Litigation finance should be one of them.

In litigation finance, an outside financier can assume the expense and risk of pursuing a commercial claim or pool of matters, in exchange for a portion of the ultimate award, if the matter is successful (if it is unsuccessful, the financier loses its investment). Therefore, litigation finance can boost origination by enabling lawyers to take on cases that their management committee would have otherwise declined because of the risk and by allowing lawyers to pitch clients with alternative billing arrangements that offer potential clients options to retain the lawyers of their choice. Firms that are highly motivated to promote women lawyers should consider allowing a third party to finance some of the caseload of their emerging women rainmakers.

Just like their male counterparts, highly successful women lawyers tend to be great rainmakers. When it was announced earlier this year that Faiza Saeed would become presiding partner of Cravath, Swaine & Moore in 2017, “top rainmaker” often preceded “first woman” in the resulting media coverage.

Women rainmakers are increasingly evident in the world of law. We just need more of them. And if we can help women be better rainmakers, we can go a long way toward closing the pay gap for women in law, once and for all.