The benefits of a genuinely diverse organisation are clear: recent research by Ernst & Young indicates that companies high in diversity and inclusion of its people have better results in:

  • Discretionary efforts (12 per cent higher)
  • Retention rates (19 per cent higher)
  • Team collaboration (57 per cent better) 
  • Team commitment (42 per cent higher)

Ben Summerskill, the chief executive of the lesbian, gay and bisexual charity Stonewall, reports that following research supported by IBM: 

“Staff who can be open about their sexuality at work are more likely to enjoy going to work, feel able to be themselves, form honest relationships with their colleagues, are more confident, and ultimately more productive. Lesbian and gay equality at work evidently makes good business sense”. 

Clients are also more and more frequently asking for diversity information as part of their tender process, including details of firms’ diversity requirements of their own suppliers. 

In addition to the business case, law firms could find themselves falling foul of SRA regulation, and in particular Principle 9 of the Code of Conduct, which obliges firms to achieve the equality and diversity outcomes. These include:

  • Not discriminating.
  • Providing services to clients in a way that respects diversity.
  • Making reasonable adjustments to ensure that disabled clients, employees and managers are not placed at a substantial disadvantage compared to those that are not disabled.
  • Dealing with complaints promptly, fairly and openly.
  • Ensuring that the firm’s approach to recruitment and employment encourages equality of opportunity and respect for diversity.

Firms are required to notify the SRA promptly of any material failures to comply with the regulatory arrangements.   

Should it matter to underwriters?

Taking all of this into account, underwriters may want to probe deeper into how well run any prospective insured law firm is where that firm appears to be ignoring/overlooking both the business case and the SRA requirements regarding diversity – it could be symptomatic of wider risk management concerns. Also, a firm that can demonstrate high levels of diversity is likely to have (it seems) better team collaboration/commitment, and as such may present a better risk to insurers. Too often it is the case that claims arise from limited supervision/support. 

Diversity is already top of the agenda as far as the both the SRA and the Law Society are concerned. The SRA’s Chief Executive Paul Phillip has made it clear that equality and diversity is a priority area for the SRA and they are committed to driving through changes in light of a recent report that made recommendations to focus the SRA on the persistent disproportionality for black and minority ethnic solicitors in respect of regulatory outcomes. 

Professional indemnity insurance proposal forms request firms to provide details of any claims made (including employment claims in respect of discrimination) and, as importantly, whether the compliance officer for legal practice has reported any material breaches to the SRA in the last 12 months. A firm that can demonstrate that it has a written equality and diversity policy, together with the appropriate training offering, is likely to be considered a “better overall risk”. Taken together with evidence of the implementation of more general policies and procedures, and financial stability, it counts as an overall indicator of the firm’s approach to risk management and, in turn, the likelihood of claims arising. 

The subject is only likely to grow in importance throughout the Autumn: the SRA is to publish new equality objectives in October 2014 together with a new action plan for 2014 to 2017. 

Equality and diversity in the workplace already make ethical and business sense, but given their increasing importance to insurers they also make clear risk management sense.