Associate Bonus Watch: The Natives Are Getting Restless
We're bored (and so are you). We're just passing time until another major law firm announces year-end bonuses, in the wake of Monday's Cravath announcement.
In today's New York Times, Ellen Rosen has this interesting article on law firm bonuses:
Cravath, Swaine & Moore has raised the salary bar for law firm associates in Manhattan.The firm has announced that it will award a special one-time bonus for associates in addition to the traditional year-end bonus that the firm, like most others, already pays. All but the newest associates will receive $10,000 to $50,000, depending on seniority, which was first reported by Abovethelaw.com.
Thanks for the shout-out, Ellen!
What about other law firms? Read more, after the jump.
Expect announcements soon from Debevoise and S&C:
Surprisingly, several partners at other firms said they had not yet heard about the increases — either from other partners or their associates, who are not shy about mentioning what other firms pay. But a spokesman at Shearman & Sterling said, “We’re aware of recent developments, but are not prepared to comment.”Martin F. Evans, Debevoise & Plimpton’s presiding partner, said in an e-mail message that the firm expected “to announce this week fully competitive annual and special bonuses.”....
Sullivan & Cromwell, which began a round of salary wars in 2006 when it increased first year pay to $145,000, is likely to match soon. A law firm partner, Gandolfo V. DiBlasi, said, “We’ve always paid at the top and we intend to this year.” He declined, however, to say whether Sullivan & Cromwell would bifurcate its bonuses like Cravath or increase the total year-end bonus.
Some good final thoughts on Cravath's unusual approach to bonuses this year:
The structure matters. By awarding a special bonus, Cravath is not tied to the amount for next year. Mr. Chesler said that “it’s an uncertain economy,” and said that unlike a corporation that had retained earnings, law firm partnerships “distribute net income above expenses, and part of that is what we pay our employees.”
The bifurcated bonus structure is a shrewd move on Cravath's part. It allows CSM to be a market leader on compensation, while at the same time (1) controlling bonus expectations for 2008 and (2) giving competitors a fig leaf for not matching the full, total bonus (as opposed to matching just the year-end bonus). It will be interesting to see whether other Biglaw shops adopt the Cravath approach.
Law Firm Is Giving Its Associates Two Year-End Bonuses [New York Times]
(40) Comments
First?
First!
OMG - this must be a slow day...... unfortunately, it's also slow for us and all I have left is reading ATL and waiting for better/more interesting/less important news. :-(
I think someone else said it in a prior post on the CSM "special bonus" but it warrants repeating:
Why don't they just call the compensation system what it really is - base salary, deferred compensation (now called a bonus) and a bonus (now called a special bonus). Not that a law firm has ever been accused of this, but it seems to be more a honest way of viewing things.
Will one of the market leaders be bold enough to trump Cravath and not bifurcate the bonus. I think S&C could be the firm to try and raise the bar. It could get interesting.
My dyslexia kicked in -- that should be "it seems to be a more honest way" not the other way around. Sorry.
S&S is going to announce their bonus next, taking the lead this time instead of waiting until the end...
I'll tell them to wipe their ass with that fig leaf if other firms try using that approach.
What ever happened to talking about something besides Bonuses on this site? For instance....
NYTimes: Training Law Students for Real-Life Careers : http://www.nytimes.com/2007/10/31/education/31lawschool.html?ref=us
I think what it really is is:
- base salary
- bonus for sticking it through the year (and, in some firms, for hitting the min number of hours)
- bonus "because the firm had a good year" (but really because the exit opportunities are affecting retention)
Lat, do a thread on the upcoming raise for federal employees. 3.5%! It's already passed in the House. It's raining gold in BigGov. Gold, I tell ya.
I don't know that deferred compensation is the best way to describe the "standard" bonus that we've seen the past few years. One needs only to look at the lean bonus levels of 2001-2003 to see that a 35k+ bonus is far from a guarantee.
Rather, I think the bifurcation of the bonus by Cravath and soon others is a reflection that we are not facing a recession or otherwise a major slowdown next year, 2008 is not going to be a repeat of the extremely elevated levels of activity that we saw in 2006 and the first half of 2007.
Instead, 2008 will look a lot like 2005, and that's a good thing for everybody.
what about signing bonuses for MBAs?
I just started at biglaw on Monday. Is this what you guys do all day? Mind-numbing.
oh my god, i can't stand these "first" posts on every fucking thread i read. goddamn it why do i have to scroll past these idiots to read substantive comments? Lat you let this keep happening, do something! please!
1:24 is a loser
1:24: You're right. Especially in light your comment's relevance and substance.
As for my substance: hearing at least one Biglaw will trump Cravath very shortly.
1:28: Signing bonuses for MBAs was covered already. Look in the archives or perform a site search.
The whole concept of a "special bonus" is stupid. A bonus is a "special bonus". If it's not a "special bonus", it's salary.
1:31: says you. but, 1) people frequently have contractually guaranteed minimum bonuses; and 2) there's nothing "special" about an annual bonus, though its value -- unlike that of your salary -- is not set in advance.
Just a thought, but I bet one factor in CS&M's decision to grant a special bonus is that it is not making any lit partners this year (to the shock of the associates). Mid- and Senior (lit) associate retention is going to be a big issue.
Just a thought, but I bet one factor in CS&M's decision to grant a special bonus is that it is not making any lit partners this year (to the shock of the associates). Mid- and Senior (lit) associate retention is going to be a big issue.
1:36:
1) How many biglaw associates do you know who have "contractually guaranteed minimum bonuses"?
2) If the value of an annual bonus is not set in advance, then why wouldn't Cravath just announce a year-end bonus of $45K for first years? Why the charade of a "year-end" bonus and a "special" bonus? If it's not set in advance, and everyone knows it, why try to temper expectations of next year's bonus? Isn't that just an admission that people should expect a minimum of $35K next year? Isn't that salary?
To renew my post on what appears to be an orphaned thread:
How about this: I'm a 2005 grad. I'll bill 2500 this year at Boies Schiller. Because we're paid based on the revenue we generate, instead of lockstep, I'll make 170 base plus a 70k-plus bonus -- take that, Cravath et al. Oh, and I didn't do a single hour of doc review this year.
Why doesn't anyone get this?
i just thought about it a little more, and i came to a conclusion: 1:24 is still a loser
1:49: the reason Cravath didn't just announce a year-end $45k bonus is (in my theory) because they're hoping others _won't_ match. The big (V10 or so) firms have been looking for a way to separate themselves from their not-quite-peers (V11-V80 or so) in compensation, but every time they increase pay, all of the others follow suit immediately. By giving a "standard" bonus and a "special" bonus, they're hoping that not-quite-top-tier firms will only match the year-end bonus but continue to argue that they're paying market: "Of course we're market! We paid the same salary and annual bonus as Cravath!"
Paying the "special" bonus up-front is especially clever, because it means that firms who've had difficult years (structured finance, e.g.) would need to cough up a bunch of cash right now to match. Far easier just to sit back and pay only the year-end "standard" bonus and see what happens.
Of course, this is just me being pessimistic.
2:03: Fair points.
1:52 - you'll be getting $15K more than me, and you billed 550 more hours. How'd that work out for you? Well, let's see - $15K/550 hours = $27/hour. Nice work. Way to think it through.
I don't think this "special bonus" provides much separation for Cravath with respect to recruiting or retention.
If Cravath truly wanted separation for recruiting and other purposes then the extra bonus should have been presented as either part of the year end bonus or as a comp increase. For recruits this bonus means nothing other than the firm had a good 2007, but because it is "special" recruits cannot count on this bonus ever being paid again.
For those arguing that this bonus is aimed at retention the only problem I have with this characterization is that the bonus is being paid within a week. Unless this bonus is directed at retaining specific people, you would have expected a pay out date that was based on lawyers sticking around for another month or perhaps until year end. By not attaching the special bonus to a more permanent comp feature (ala Simpson) it doesn't do much for retention because there are no guarantees it will ever be paid again and once Nov. 9th rolls around the cash is in each associate's bank account.
I honestly am not sure what the bonus is trying to accomplish. It truly seems like this bonus and its characterization represents a negotiated middle of the road approach between partners who did not want to do anything and partners who wanted to attach the bonus to permanent comp. If firms are looking for real separation I truly think they will take this opportunity to trump Cravath and just announce either a Simpson type system, or that they are paying a higher regular bonus. By providing some sense of permanence this bonus would force true separation. Will be interesting to see how this plays out.
Debevoise just announced
Debevoise has just matched Cravath's bonus and special bonus
Did Debevoise call it a special bonus or are they paying a single bonus?
Same timing? Are they calling the extra piece a special bonus?
Debevoise is calling it a special bonus too, and it's paid on Nov 20. They're also giving class of 2000 and older $65K in regular bonus, which I think is a bit more than Cravath.
Yes, extra is "special bonus" for Nov 20. Normal bonus = end of year.
I have been trying to get into Movable Type to post this, but we've been experiencing technical difficulties.
The authenticity of this has been confirmed for us by numerous sources.
From: "Evans, Martin Frederic"
Date: October 31, 2007 2:21:59 PM EDT
To: "Associates--Domestic"
Cc: "Partners--All"
Subject: 2007 Bonus Announcement
We are pleased to announce for U.S.-based associates both year-end bonuses and special bonuses for 2007. Bonuses will be paid to associates in good standing and will be subject to the usual pro-rations for part-time programs and lengths of service of less than the entire year. The special bonuses will be paid November 20 and the year-end bonuses will be paid in December. The bonus amounts for 2007 are as follows:
Class of 2007: Year-end bonus of $35,000 (pro-rated); no special bonus
Class of 2006: Year-end bonus of $35,000; special bonus of $10,000
Class of 2005: Year-end bonus of $40,000; special bonus of $15,000
Class of 2004: Year-end bonus of $45,000, special bonus of $20,000
Class of 2003: Year-end bonus of $50,000; special bonus of $30,000
Class of 2002: Year-end bonus of $55,000; special bonus of $40,000
Class of 2001: Year-end bonus of $60,000; special bonus of $50,000
Class of 2000 (and prior years): Year-end bonus of $65,000; special bonus of $50,000
This year has seen some of the largest, most complex and demanding projects our firm has ever undertaken, and your efforts have been instrumental to the delivery of superior service and advice to our clients throughout the year and to the success of the firm. We know that work loads continue at high levels for very many of you, and you have our sincere thanks and appreciation.
Rick Evans
For All Partners
WHAT ABOUT SIMPSON???? When are they going to announce????
2:17 -- 1950 for the year? dogging it, eh? that can't be typical of cravath, simpson, etc.
2:17 - Not typical, but not insanesly low either. Every biglaw attorney likes to pretend he/she bills 2400+ a year, but those people are in fact the exception rather than the rule.
Correction to my 10/31 1:52 post: BSF, at 2500 hours, gets you 170 base and 85k bonus, +/-, 30k over market for what is, on balance, a typical year for anyone planning to be a partner.