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Atlanta-In an effort to increase the racial and gender diversity of its outside counsel, Wal-Mart Stores Inc. has changed 40 of the relationship partners at its top 100 law firms, said an associate general counsel, Samuel M. Reeves. “In each case, it was a shift from a nondiverse to a diverse attorney,” he said. The move follows up on an evaluation that Wal-Mart’s legal department initiated in June, when it asked its top 100 outside counsel, based on billings, to provide a detailed report of their employment of minorities and women since 2002. Reeves’ June 13 letter also asked each firm to submit a slate of three to five candidates, including at least one woman and one person of color, for the relationship role with the company. “Wal-Mart will end or limit our relationships with law firms who fail to demonstrate a meaningful interest in the importance of diversity,” the letter said. Wal-Mart’s general counsel, Thomas Mars, announced the vetting exercise in July at an Atlanta diversity seminar. He said at the time that he decided a shake-up was needed when he saw that 82 of the relationship partners at Wal-Mart’s top 100 firms were white men. Reeves said the goal of the review was to increase the number of female and minority lawyers among its outside counsel, particularly at the partnership level. Only 17% of law firm partners nationwide are women and only 4% are minorities, according to 2004 statistics from the National Association for Law Placement. “Having more women and lawyers of color at the partnership level means they have more ownership at firms,” Reeves said. $200M in legal services Wal-Mart’s changes in relationship attorneys represent a shift of $60 million worth of work, assuming the relationship attorneys get credit for the billings, Reeves said. Wal-Mart spends $142 million with its top 100 firms and $200 million on all outside legal services each year, he said. Reeves emphasized that Wal-Mart evaluated firms’ “institutional commitment” to diversity and did not simply tally the number of women and lawyers of color at each. “There were firms that might look really good in terms of numbers but who did not do so well” according to the reports they submitted, he added. Instead, Wal-Mart checked the retention rate for minority and women lawyers compared to white male lawyers and looked at the percentage of minority and women lawyers promoted to partner. If Wal-Mart’s lawyers liked a firm’s diversity report, then Wal-Mart probably did not change its relationship partner, even if that person was a white male, said Reeves. “If we made a change, then our view was that improvement could be made at the firm.” He added that Wal-Mart also compared firms’ diversity in the past to their diversity at present. In some cases, “we could see improvement and saw [the change] as a way to move it along,” he said. The significant changes in relationship partners did not cause a wholesale shift in the firms that get Wal-Mart’s legal work. The company dropped just one firm from its list of outside counsel, said Reeves. He added that the company is considering dropping five other firms if their diversity efforts do not meet Wal-Mart’s standards. He declined to name the firms. The company’s main criteria in choosing outside firms are cost, performance and diversity, he said. Reeves said some of the firms’ diversity reports surprised him. “There were some firms who had very detailed diversity plans but who were not executing effectively. And there were some firms with no diversity plan or committee that seemed to be doing quite well,” he said. Next year, Reeves said the company will ask all of its roughly 250 outside firms to participate in the diversity review, which it plans to conduct annually. Reeves said the legal department’s diversity initiative was not a reaction to an ongoing gender bias suit filed in 2001 in San Francisco that claims the company discriminates against its 1.6 million women employees. The changes were unveiled in September at a conference Wal-Mart held with representatives of its top 100 firms at the company’s Bentonville, Ark., headquarters.

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