Hello and welcome to the Fides Weekly Update. Take a look at this week’s key trends, moves and developments in legal and compliance.
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This week:
1). Those from lower socio-economic backgrounds more likely to leave firms despite being higher performers, new report finds
Despite encouraging efforts by law firms to increase the diversity of those entering the profession, less attention has been paid to who stays on, gets ahead and how according to a joint study into the social mobility of early career lawyers released this week by The Bridge Group in collaboration with eight leading law firms and UK social mobility foundation The Sutton Trust.
The first study of its kind, the report examines the correlation between background characteristics and early career progression in the legal sector and is based on survey data from over 2,800 early-career professionals, as well as interviews with current and former employees, senior partners and law firm leaders.
The eight firms involved in the study included Allen & Overy, Bryan Cave Leighton Paisner, Clifford Chance, Dentons, Hogan Lovells, HFW, Linklaters and Pinsent Masons.
The report found that the population of trainees and associates across the eight participating firms was deeply unrepresentative of the eligible candidate pool, with 46% of early career solicitors having attended an independent school, compared to 18% nationally. 28% of those in the study were also the first generation in their family to study at university.
More concerning was the fact that, despite those from lower socio-economic backgrounds more likely to be the highest performers in their firm (14% received the highest performance ratings, compared to 8% of independently educated trainees) they appear on average less likely to progress within their institutions.
The research finds that the proportion of first-generation early-career solicitors falls from 30% of trainees to 27% of associates, while state school-educated trainees comprise 55% of trainee leavers, compared to 57% of associate leavers.
Reasons cited for this include micro-aggressions lawyers from lower socio-economic backgrounds face within law firms, as well as the way in which firms define talent and what makes a lawyer successful.
Junior lawyers from lower socioeconomic backgrounds are under “intense pressure to fit and assimilate into the dominant culture”. This is in the face of micro-aggressions – defined as “everyday words or acts that communicate denigrating messages to certain groups who are perceived as different” – from their peers and management. Whilst there is often no overt intention to offend, the existence of such micro-aggressions makes individuals from minority groups feel inferior or excluded.
Interviews for the study also suggest that there is a perceived tendency to recruit and progress solicitors who share similar traits to those who currently dominate the profession. Such characteristics include lawyers being “confident”, “charismatic”, “driven”, “ambitious”, having “gravitas” and being good “self-promoters” – although such traits have little correlation with work performance. As such, it is made easier for solicitors from higher socio-economic backgrounds to progress, as mechanisms associated with how experience is gained and work allocated is based on an outdated and misinformed perception of talent.
Interviewees describe the pressure to fit in as “exhausting”, “tricky”, and “worrying”, and cite actions such as toning down their accents, adjusting their speech, avoiding certain conversation topics and feigning interest in others as strategies to cope. “For trainees joining as part of an intake, the result will be that they start to feel that they don’t ‘fit’ very quickly” states Linklaters diversity and wellbeing adviser Jenny Lloyd.
As such, the report accuses some law firm leaders of “complacency” for not calling out such behaviour and, as a result, contributing to environments in which individuals can feel isolated and struggle to progress. It argues that although encouraging efforts have been made by law firms to improve diversity in their recruitment processes, much less attention has been paid to tracking how trainees progress, and how that correlates to their socioeconomic background.
The study also recommends a number of short and long-term actions that law firms can take to reduce the effects of socio-economic background on retention. These include:
- To actively engage key audiences within the firm and articulate more clearly the drivers and actions associated with diversity and inclusion at all levels. For example, through the use of reverse mentoring schemes, such as those now in place at Linklaters and Allen & Overy.
- To introduce greater transparency relating to decisions about progression, promotion and work allocation to challenge perceptions about what defines talent and success
- Developing a strong narrative to clarify how diversity targets will be set and managed.
It also suggests that law firms should submit detailed workforce diversity data – including information on pay – to a “trusted third party” to benchmark data anonymously across the sector, a task it proposes be carried out by the PRIME programme, a social mobility initiative launched by a number of major law firms in 2011.
If you are interested in this subject, please see information for our upcoming event on how technology can be used to mitigate bias and micro-aggressions within law firms. Click HERE to find out more and reserve your spot.
2). FCA imposes its first ever bank fine for a cyber related incident
Tesco Bank has been fined £16.4m by the Financial Conduct Authority (FCA) for what they deemed “a largely avoidable incident” concerning a cyber attack in November 2016.
Over the course of 48 hours, hackers were able to steal £2.26m in funds, due to a series of failings carried out by the retail bank. Originally laid out as a £33.6m fine, the UK’s financial watchdog agreed to a lower penalty as Tesco Bank agreed to settle the charges and had already compensated it’s out of pocket customers.
Summarising its investigation, the FCA has relayed a full account of the incident as well as the bank’s disregard on multiple occasions for a need to perform stringent cybersecurity procedures. Below is a review of Tesco Bank’s shortcomings.
Delayed response
A lack of urgency in the bank’s protocols meant that the response to the attack was too delayed. It took 21 hours for the operations team to initially report the issue to its fraud strategy department, and a further day for senior management to be notified.
With the attack taking place on the 5th November, and the issue finally being resolved on the 7th November, the fraudsters were given an excessive amount of time to execute their attack.
Poorly designed debit cards
The bank’s debit cards had been issued with sequential PAN numbers i.e. the long number on the front of debit card. This made it overly simple for hackers to guess customer PAN numbers and was seen as an avoidable oversight from the bank’s financial crime operations team.
Furthermore, Tesco’s authorisation system only checked whether the expiry date entered was a date in the future, rather than the exact month and year for which it had been issued. This acted as another means of entry for the attackers in passing the debit card authentication process.
Failure to follow procedures
Ignoring procedures put in place for this form of attack, Tesco Bank’s Financial Crime Operations team elected to send an email rather than a phonecall to declare the incident. Having disregarded the instruction to directly phone the on-call fraud analyst, it led to the 21 hour-long delay in reporting the cyber attack, leaving the hackers with almost double the amount of time to steal customer money.
Once the vulnerability was located and a fix was put in place to block the fraudulent transactions, this was not monitored. It transpired that the fix was in fact ineffective and the number of attempted fraudulent transactions was increasing.
Ignored previous warnings
A year earlier, Visa warned its members about certain fraudulent transactions occurring in Brazil and the US. However, Tesco Bank decided to take action to thwart these transactions on its credit cards, and failed to implement the same defences on its debit cards.
Commenting on the overall handling of the situation, Mark Steward, Executive Director of Enforcement and Market Oversight at the FCA, said:
“The attack was the subject of a very specific warning that Tesco Bank did not properly address until after the attack started. This was too little, too late. Customers should not have been exposed to the risk at all.”
He also noted the FCA’s requirements for banks’ financial crime systems when it comes to online banking: “The standard is one of resilience, reducing the risk of a successful cyber attack occurring in the first place, not only reacting to an attack.”
Tesco Bank’s chief exec Gerry Mellon has apologised to its customers and confirmed it has enhanced security measures, with the aim to prevent a similar incident in the future.
3). Movers & Shakers
Panel Watch
Magic circle duo win panel places for National Grid spin-off
Appointments
Macfarlanes extends managing partner’s term by two years
Five partners in race to become next Clifford Chance senior partner
Travis Perkins brings in new GC from Dairy Crest
Paul Hastings revamps City management after O’Sullivan’s global promotion
Moves
A&O German disputes head to launch boutique as firm makes London hire
Allen & Overy German dispute resolution head Daniel Busse has left to launch his own boutique, while the firm has boosted its London practice with a partner hire from public international law specialist Volterra Fietta.
Kirkland ramps up New York recruitment with Davis Polk hire
Kirkland & Ellis has recruited corporate rising star Sophia Hudson in New York, luring her from fellow US firm Davis Polk & Wardwell.
Office Openings & Closings
HFW launches Abu Dhabi office with Reed Smith duo
Partner Promotions
Kirkland makes up 10 City partners in largest-ever global promotions round
Financials
Linklaters matches magic circle rivals with trainee pay bump
Innovation and Technology
Clifford Chance and Latham among 12 firms backing new “one-stop” tech solution
HFW launches consultancy venture as firm targets new international business