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Welcome to AccelPro Audit, where we provide expert interviews and coaching to accelerate your professional development. Today we’re featuring a conversation with Laura Mitchell, Principal at Jackson Lewis.
When it comes to reporting around ESG (Environmental, Social and Governance), the ‘E’ often gets most of the attention as companies wrestle with new rules and guidelines around carbon emissions and other environmental impacts. But the landscape around the ‘S’ — which stands for social — is changing just as rapidly as employees, other stakeholders and even activists from both sides of the political spectrum start to take a greater interest in firms’ performance in areas like diversity, equity and inclusion (DEI) and pay equity.
Mitchell, an attorney who runs the Affirmative Action Practice Group at Jackson Stone, is an expert in the challenges companies are facing around reporting the ‘S’ in ESG. She talked to AccelPro Audit about the fast-changing landscape around reporting diversity data, the importance of being data driven, auditors’ role in collecting that data and how everyone in the space is confused (but talking to peers helps).
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Interview References:
Laura Mitchell’s Jackson Lewis profile.
4:51 | Students for Fair Admissions v. Harvard, 600 U.S. 181. (2023). Supreme Court of the United States.
TRANSCRIPT
I. ON CHANGING EXPECTATIONS FOR DIVERSITY DATA
Jessica Stillman, Host: AccelPro Audit does not typically feature lawyers - we leave that to AccelPro IP Law and AccelPro Employment Law. So to get started, can you talk to me about your role and why your expertise is relevant to auditors, especially those who are working in the ESG space.
Laura Mitchell: By traditional training, I am an attorney. I actually have been a litigator for a number of years and took a step in a bit of a different direction about 10 years ago. I started working a lot with numbers, with data and statistics and analytics, which has led me to develop a really specialized niche of practice in employment law. I work with employers and look at their demographic diversity analytics in order to conduct proactive pay equity analyses.
My practice now is more rooted in Excel spreadsheets than it is in the courtroom, which has really led me to a solid foundation for this new space — and I say “new” in air quotes — around ESG corporate responsibility, because everything is grounded in objective data and numbers, which gives a really solid backdrop to then make statements, set goals, and really have accountability in what it is that we're trying to achieve as an organization or company.
JS: Many companies have been reporting some kind of ESG or diversity data for a while. How are expectations changing for this sort of information, from the perspective of regulators, but also when it comes to other stakeholders?
LM: I think the expectations around this are increasing purely because there is a push for more transparency about what you're reporting and why you're reporting these things. And most importantly, they want to know how you arrived at what you are articulating in these public reports. And the pressure is coming mostly, I think, from the public and from employees, generally. Shareholders and stakeholders and regulators are really catching up.
Pay equity is at the forefront in this space with the expectation around transparency. We're seeing more regulation set to come around in other human capital type disclosures — so that’s diversity metrics and numbers from the regulated community. But there really has been a push from within to have more transparency.
JS: Are there legal risks associated with, say, inaccurate or misleading ESG reporting, especially in the DEI context?
LM: Yes, there absolutely has been legal risk in this space for quite some time. And that risk continuum has shifted drastically, I would say, over the last year or so, and most recently with the Supreme Court decision, Students for Fair Admissions case.
What that is forcing employers to do is to have accountability, to be able to stand up and say, “What we're doing is lawful. We're not favoring one group over another group in that DEI space. We're treating everyone equally.” And where we do set these quantitative goals and metrics, it's based on actual findings and calculations that are rooted in nondiscriminatory practices and evaluations.
JS: Can you give me a snapshot of what auditors need to know about the regulatory landscape?
LM: I think the first thing to keep in mind is that it is rapidly changing, and so auditors need to make sure that they are up to speed on developments, and unfortunately, this is not at the federal level, so we don't have one set of laws. We have laws coming out of independent state jurisdictions, municipalities, so there's really a lot to keep track of.
There has to be continuing education around what the laws are, the expectations when they go into effect. And right now the biggest push is in pay transparency. We're seeing so much in these pay laws around what you have to disclose to whom and when.
Certainly for government contractors, there are obligations and reporting that you have to do on an annual basis. And then, with respect to what you're allowed to do or take into consideration, there are these anti-woke ESG type laws that are governing fiduciary duties and all of those other aspects. It's multifaceted, in multi-jurisdictional spaces.
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II. ON THE IMPORTANCE OF BEING DATA DRIVEN
JS: Can you talk to me about some of the metrics or measurements that you are encouraging companies to gather and to look at to establish that their programs are lawful?
LM: Let's take the DEI space, for example. I think that's one that's on top of everybody's mind. There is a real push from employee organizations, from stakeholders, to have a program in place to increase diversity within a workforce and that can look like a number of different things, whether it's at certain levels within management or executives or overall population.
There's this expectation that companies are saying, “We will strive to have X number of our employees representing underrepresented minorities or females.” So the push is to set these goals that can be measured. Now the question is, how do you set those goals?
Some companies, and it seems like a really laudable goal, say, “We want 50 percent of our executives to be women of color.” But what is that grounded in? Where is that expectation coming from? Because the challenge can be that you're giving unfair treatment to female minorities in selecting them over white non-minorities — or giving them preference in the hiring or the selection process.
The first part is to show that there is actual underrepresentation in your workforce at those levels compared to what is available, or what the expectation could be. You have to set the benchmark first and then compare yourself to that benchmark to determine whether or not there actually is progress to be made in that space for the organization.
That's just one example, there's another example with respect to pay equity. Companies are commenting on their pay gap, you know, women are making 99 cents to every male dollar. What is the basis for that? You need to do that analytical computation in order to support that conclusion or that statement.
JS: What's the role of auditors in these sort of determinations and data gathering that you're talking about?
LM: That's a great question because it's changing. Typically, audit committees, auditors, have not been involved in the pay equity analysis or the diversity analytics, but more and more as organizations are building out their compliance and their governance programs and teams, audit is starting to become part of that conversation.
We are working with them to apprise them of what our methodology is — how are we establishing these goals? Where are we getting the data and what are we doing with that data once we have conducted the analytics? It's shifting towards more auditor involvement and that's, I believe, a direct response to this push for transparency and accountability.
JS: Is there anything you'd recommend in terms of getting up to speed on the Social, the DEI side of things?
LM: I think right now, because there is this void of unified governance, we don't have a whole lot of regulations or implementing materials saying, ‘this is the law’ and ‘this is what you do to comply with it.’ But I do think that so much is data driven today, so my recommendation is to find a grounding in data analytics.
It doesn't mean you need to go out and become a statistician, but having a basic understanding of some statistical principles—What is a standard deviation? How do you calculate that? What are some of the general tools that are used?—so that you have a more conversant understanding when your experts start coming to you and saying, “This is our methodology for arriving at these numbers,” there is a base level of understanding so you're not having to educate yourself around the principles, and you can really focus on, does this make sense for our organization?
JS: Governance is another thing I want to ask about. I've heard you argue elsewhere that governance is actually incredibly important to ESG overall,and it can be instrumental in helping companies with their environmental and social goals. Can you talk a little bit more about the role governance plays in a company's overall ESG efforts?
LM: I think, most simply, good governance allows for organizations to withstand challenges to the legitimacy of their programs and the legitimacy of their practices and the goals that they're establishing. So if you can demonstrate that you have good governance, you have good hygiene around what you're doing and how you're doing it, I think you will better withstand scrutiny from any number of sources, whether it be regulators, whether it be the public, whether it be employees, plaintiff's counsel. So I think those true governance principles will really help you stand up a solid, defensible program.
JS: And do those have commonalities across, say traditional financial metrics?
LM: Absolutely. Take for example, ensuring that the organization or the team that is looking into and pressure checking your methodology and your record keeping is separate and apart from the team that's actually conducting the analytics. You want to have that separation, those checks and balances to remove any issues of conflict of interest.
We don't want to have a self-fulfilling prophecy that the team who's doing the work says, “Hey, our work is fantastic” because they're the ones evaluating it. So general common governance principles like that, I think, are really important.
JS: I want to circle back to pay transparency. Many states have different laws, and it's quite a patchwork of regulations. So if you're a multi-state employer, how are you guiding companies to develop policies that comply with all of these varying legal requirements?
LM: I wish there was a one size fits all response that every organization across the country could just implement. But the truth of the matter is it really depends on the organization, where your employee population sits, what your compensation philosophy is, do you have a majority remote workforce or are you actually sited in facilities in certain jurisdictions?
The first part of that calculus is to sit down and talk about who you are as a company and what you stand for. Do you want to ensure that regardless of where your employees sit they are all paid comparably to each other? If that's the case, then you're not going to have a different pay practice for someone who sits in California than for someone who sits in Tennessee or Florida.
And that will matter because that will dictate how you set compensation. That will then influence what you report on your job postings for those jurisdictions that require job postings. So it really comes down to, do you want to take a unified approach across the nation, or do you want to have piecemeal reporting obligations and compliance?
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III. ON RELYING ON PEERS IN A FAST-CHANGING SPACE
JS: Could you give me a brief snapshot of how you ended up in the specialty you are today?
LM: I had what I've been told is a unique career journey. I started out as an associate attorney in a small boutique employment defense firm. We were working for organizations, helping them defend EEOC charges and general employment litigation type matters. I then went in-house with an organization where I was advising them on their internal investigations and internal labor and employment matters, and then I went to a very large labor and employment firm in a very specialized niche in affirmative action, OFCCP defense work.
I was doing the diversity analytics. Because of that perspective, I really started to love the numbers and the data. I was never afraid of them, but really latched onto this proactive work, helping organizations ensure that they can create a path forward to achieving what they want to achieve in a defensible way.
JS: It's interesting that you had both the in-house roles and roles at a bigger firm, because choosing between firms and in-house (or in industry) is a common career decision not only for lawyers, but for auditors as well. Do you have any advice about how to make that decision and what the pros and cons of each path might be?
LM: Because I had the in-house opportunity earlier on in my career I'm not sure that it was the same choice that someone later on in their career would be making where they've already had the big firm experience. But for me, it came down to the type of work that I was going to be doing.
I really knew in my heart of hearts that I'm not a litigator. I don't like to fight for the sake of fighting, which in my perspective is a lot of what litigation comes down to. And I really liked that opportunity to counsel and to work through solutions in a practical way, which is a lot of what you do in-house.
And then I found an opportunity in big law to actually continue that type of practice, but for a variety of different types of clients and a variety of different industries. And it came with the opportunity to develop an additional career path because the pay equity part of my practice happened after I got to the firm and started in the Affirmative Action Practice Group.
For me, it made a whole lot of sense that I got to keep doing the things that I love to do, working with people, the proactive work, but also I had the opportunity to diversify my portfolio by working with a bunch of different types of clients in a bunch of different spaces.
JS: How do you rely on peers, both inside and outside your organization to deal with tough situations or manage career decisions? Can you think of a time, for example, when advice from a peer was really critical for your career?
LM: I rely on my peers almost every day, both inside the firm and outside of the firm because my area of practice is very specialized. There's only a few of us in the country who truly specialize in just this area. We rely heavily on each other to brainstorm about unique solutions to a new law, or when there's not much explanation or guidance given from a jurisdiction as to implementation. It's really helpful to see what other organizations are doing.
There's a lot of idea sharing and collaboration within the firm. We have a small team of attorneys. It's a large practice, but there’s a small team here in Denver and a team in Long Island, and we are constantly talking about what trends you are seeing from the government or from enforcement in certain areas, or where we are seeing the laws develop — where you have a small little case in Florida that we need to watch because it could have big impacts on the risk profile for some of the projects that we're undertaking.
From a professional advice and counsel standpoint, that input is really important, but so is just having friends in the industry to commiserate with when the going gets tough. You know, there's a lot going on right now, we're being pulled in so many different directions, it's really nice to know that you're not the only one, that everybody else is feeling that tension and that pull.
We truly are friends across this industry and rely a lot on each other for professional support and moral support. And also we all have different areas of expertise. There may be a group that does a more specific type of analytics in a new way, or a new vision of something that you can learn from which you haven't done in the same way yet. So there's a lot of information exchange on a lot of different levels.
JS: Is there anything you would suggest or best practices that auditors should keep in mind?
LM: I can't tell you how many conversations I have started with, “You're not the only one that feels like you don't understand what's going on.” This space is changing so quickly, as we talked about, and folks are figuring it out on the fly. I think my biggest advice is to, one, just recognize that you're not alone in this. The majority of folks are still trying to figure out how to administer and work in this space.
But I think my second piece of advice is to challenge, to ask questions, to think outside the box. This is a new space. And while a lot of our past practices, our governance practices, make sense, a lot of them may not. It may not make sense to spend time and energy trying to fit a round peg into a square hole when you can just come up with a new way to do something. So, the biggest piece of advice is to just go in with open eyes and to challenge existing processes so that we can build something that's better suited to the needs of today.
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This AccelPro audio transcript has been edited and organized for clarity. This interview was recorded on September 19, 2023.
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