These are interesting times for the world of Biglaw. Some large law firms are feeling so flush they’re giving out not one but two bonuses this year. Others are laying off associates. Sharing space in the pages of ATL are dueling features: Associate Bonus Watch and Nationwide Layoff Watch.
Before the next round of bonus news, it’s time for some layoff coverage. In the New York Law Journal, Anthony Lin has this report:
In one of the first clear signs that slumping credit markets are causing economic pain at law firms, Clifford Chance on Monday laid off a group of associates in the structured finance area.
John Christian, the partner in charge of the London-based firm’s U.S. personnel committee, said the firm had made a difficult “business decision” to lay off the six associates in a practice group that worked exclusively for credit rating agency Standard & Poor’s. The lawyers in the group had reviewed the documentation S&P used to rate mortgage-backed securities, the market for which has collapsed in recent months.
“We concluded this work just wasn’t coming back,” Christian said. He declined to discuss the severance packages offered to the associates, but one of those terminated said they were offered three months’ salary with no bonus. Indeed, the associate said the timing of the layoffs seemed designed to deprive the targeted associates, all of whom were relatively senior, of their bonuses.
Interesting. So are associate bonuses and layoffs just two sides of the same coin?
More after the jump.
Being able to enjoy three months of a Biglaw senior associate salary, without doing any work, sounds like a sweet gig (cf. Gera Grinberg). But perhaps there is the matter of finding a new job — which might not be easy for specialists in structured finance.
Lin also links the bonuses and layoffs:
The high bonuses announced by law firms have stood in contrast to bad news at major clients like investment banks, many of which have already had layoffs. Many of the layoffs at banks are also linked to the weakness of the structured finance market, and many of the law firms with large practices in the area may feel pressure to make cuts.
Clifford Chance was actually not a major player in the U.S. structured finance market, at least not compared with firms like Cadwalader, Wickersham & Taft; Sidley Austin; Orrick, Herrington & Sutcliffe; McKee Nelson and Thacher Proffitt & Wood, all of whom have scores of lawyers in securitization practices that have slowed considerably.
Law firms are generally loath to engage in layoffs because they hurt the firm image in the eyes of both lateral and law school candidates. Clifford Chance is still wrestling with the fallout from a leaked 2002 associates’ memo that described widespread misery at the firm.
Nevertheless, law firms have engaged in major layoffs in the past. Shearman & Sterling laid off 10 percent of its associates when mergers and acquisitions plummeted in 2001, and the former Dewey Ballantine also had a number of layoffs.
But do layoffs still carry the stigma they once did? Or as law firms become less like professional partnerships and more like ordinary businesses, will layoffs become more of an acceptable phenomenon? If even partners can be asked to leave or demoted, through the “de-equitization” process, should associates be immune?
One final comment: at least CC is being open and honest about what it’s doing. It’s much more honorable to admit you’re doing layoffs than to disguise them as performance-based dismissals. Sure, the firm takes a public relations hit — but it’s better for the laid off associates, who are not saddled with the baggage of having been dismissed for subar work.
Clifford Chance Lays Off Six Structured Finance Associates [New York Law Journal via Law.com; also available via Yahoo! News]