Associate Bonus Watch 2007, Biglaw, Bonuses, Money, Screw-Ups, Skaddenfreude

Associate Bonus Watch: Getting to the Bottom of the Cadwalader Mystery

associate bonus watch 2007 law firm Above the Law blog.jpgWe’ve spent a ridiculous amount of time and energy trying to get to the bottom of the bonus situation at Cadwalader, Wickersham & Taft. We’ve heard all sorts of conflicting rumors, but we think we’ve finally figured things out — to the extent that they can be figured out. This post supersedes all prior coverage of CWT bonuses.
In Litigation, we think that bonuses were fairly straightforward. This is our understanding, on very good authority:

1. 1900 hours and above = full, market-level, year-end and special bonus.

2. Between 1850 and 1900 = 75 percent of the regular year-end bonus, but NO special bonus.

3. Below 1850 = nothing, nada, zilch. Unless you were a first-year from the class of 2006 (first full year at CWT), in which case you got 50 percent of a year-end bonus.

4. For purposes of calculating hours, only client billable, pro bono, and “pre-approved” marketing hours counted. Other marketing hours, and recruiting hours, were NOT counted.

Read more — including a dramatic epic narrative from a CWT associate, describing how the firm epically mishandled the bonus situation — after the jump.

What we described above were the bonus rules for Litigation, as set forth at a department meeting. Outside of litigation, things were a bit more complicated.
Says one source on the transactional side:

I don’t think this [scheme] applied to anyone in corporate. I have not heard of this. I do know there were plenty of goose eggs….

I really don’t believe it was largely hours based. I think they determined who they wanted to pay ( = who they wanted to stay), then reverse engineered a rule that colorably came out with that result.

More interesting is that the second years (first full year, class of 2006) under 1850 hours got half regular (not special) bonuses.

Rather opaque. We pressed for more information:

Unlike Wachtell or Cravath, transactional practice at CWT is balkanized into a number of groups — Global Finance, Capital Markets, Corporate, etc. So there probably aren’t firm-wide rules, or even litigation versus transactional rules, for bonuses. There certainly were no rules officially stated, except that they told some people who asked if they were under 1850 that they weren’t getting anything (other than the second years). As far as I know, only the corporate second years got 50% bonuses.

In short, I am skeptical there were any rules at all, but I’m sure that any corporate bonus rule is different from a litigation bonus rule.

From a different source on the transactional side, a concise summary of the bonus situation:

No clue. Nobody really knows s**t, and I for sure don’t.

Finally, as promised, the epic account of how CWT botched bonuses. It’s written with flair, and a good read. Check it out below.
Today, I fancy myself a cast member in a legal thriller. Perhaps it would be based on a John Grisham novel, with Tom Cruise in the starring role. It is a curious tale of heartbreak, one involving a Wall Street law firm caught in a web of indefensible lies and deceit: A management committee hides bonus policies. A partner embroiled in scandal flees to a remote island. The ghost of John L. Cadwalader warns inquisitive partners to stop asking so many questions.
Last week, Cadwalader hit new lows in an already complained about lack of communication to associates when we learned that the management committee changed the informal policy on bonus distribution, as late as the week prior to bonus memo distribution. Associates were not informed of the policy until after they were “awarded” their bonus. This sudden change in the firm’s position is likely going to be more harmful than the firm anticipated.
CWT may not care, and in fact may rejoice, that associates in even strong departments are threatening to search for other opportunities. However, the hit that this move takes on the firm’s already [weakened] reputation could be major. Cadwalader has some serious reorganizing and damage control ahead if it wants to remain (yes haters, I meant to say remain) a competitive firm. It doesn’t help that many associates, whether they got the cash or not, are collectively determined to stop recruiting for the firm, unless the recruitment committee wants interviewees to hear their tortured tale.
Traditionally, bonus policies are not based on hard hours (they used to be). Through department representatives, we learned that bonuses would be treated as they were in the past, and this message remained constant before and after the unfortunate Capital Markets and Global Finance department layoffs. A basic summary of the vague, traditional “policy” is that target hours are 1900. Associates who around that area are generally in good shape. It isn’t worth going into too much detail, but the general consensus around the firm was that as long as we weren’t hiding from work, and our hours weren’t extremely short of target, we would be ok. We did not have an indication of how the special bonuses would be distributed, but were simply told it would pretty much be dealt with in the way that regular bonuses were treated in the past.
Litigation associates were not expecting to lose out on full bonuses. In the wake of the layoffs, Greg Markel, litigation department head and member of the management committee, told litigation associates that the department was healthy and the backbone of the firm. (This was a week or two prior to bonus distribution.) He specifically stated that bonuses would not be based on hours and associates had nothing to worry about. This assurance was one of many that were given in previous weeks and months . On December 21st, at a litigation breakfast, a partner similarly assured associates that bonuses were not to be based on hours, and that lit associates should all be fine (as far as he knew, this was true).
Fast forward to bonus time. Bonus memo distribution was delayed twice. Things around CWT felt fishy. Greedy associates waited restlessly. Thursday morning, most but not all associates received their memos. The memo-reading ceremonies began with quiet disappointment. But then, associates started talking — to each other. Solitary disappointment turned into department-wide discontent, starting with the litigators. The litigation associate representatives called a meeting for 5:00 p.m. that same day. This meeting is where we officially learned of the actual bonus cut-offs, and each finding was matched with audible disgust. Anyone who was concerned about the money suspended greedy entitlement and turned their concern to the lack of respect displayed by the firm toward its associates.
It was not just one person mad about not getting their bonus; everyone was mad. The firm perpetuated a misrepresentation over which hours counted as billable and which hours did not. They did not bother to tell us. One man, Greg Markel, was responsible for awarding bonuses in litigation. Review was not an option. My paraphrase — no, our paraphrase — of CWT’s new bonus policy: “Over 1900 hours: full bonus plus special. 1850 – 1899: 75% of full bonus, no special. Between 1500 – 1849: half bonus for second year associates only. Below 1849 for everyone else: nothing. Oh, and by the way, those recruitment hours that have always counted, don’t. And those marketing hours don’t count either. Unless we say so.”
At this meeting I learned that: several associates were over 1900 hours until their marketing/recruiting hours were taken out of the equation. Several associates had appealed to their partners regarding bonuses; the partners were clueless and surprised that bonuses were not awarded. Associates were still upset about the new hours grid, but mostly upset about the blatant deception in not counting marketing/recruiting hours.
The change in marketing hours was very problematic, because it affected so many associates who had been approached by partners for projects, or used the opportunity to get writing experience they were not otherwise getting through traditional billables. The firm now says that only “pre-approved’ marketing hours counted. The problem is that there were no such thing as pre-approved projects because all marketing projects are count toward hours. Rather, the firm instituted an arbitrary policy that some marketing hours counted (a partner’s book, for example) and others didn’t. They gave no guidance about the official distinction. Recruiting hours similarly were problematic, but I am still unclear as to if all recruiting hours did not count, or just some. Associates in all departments were affected by the policy. The corporate department recently had a meeting to address their issues with the policy.
[Earlier this week,] a rumor started that partners, who litigation associates were appealing to for help with confronting “the deciders,” received a warning from the management committee that they should not back associates. I don’t know what this means, but if actually true, it is a chilling insight into the workings of the committee.
I still have respect for Cadwalader. I don’t think I’m leaving. I am very satisfied with the opportunities I have been given to develop in the practice area I have chosen.
I am not happy with the inattention given to associate satisfaction. I don’t like being treated like the disposable worker bee that I am to the firm. Associates need to feel valued, otherwise they turn around and write unforgiving critiques of their workplace without batting an eyelash. In an attempt to make us feel valued, perhaps, one noble management committee action on bonus day was having the department heads of every department speak personally to associates who did not receive full bonus. I am appreciative that the firm took measures to preempt the unrest that would necessarily follow the bonus announcement. What did the department heads say in these personal meetings? I have no idea. As the bonus memo hit my inbox, Greg Markel, our audacious leader, was already on a plane to beautiful St. Maarten.
P.S. The explanations we were given for traditional policy are very complicated. [But it] always very clear that “everyone” gets bonuses, unless the firm is trying to send you a message. I think detailing to old policy is almost unnecessary because the main point is that there was a clear divergence.
[T]he reason so many attorneys didn’t get a bonus is that, for a few months, work was really slow for a large number of attorneys. I want to drive this point home, because [one could argue] that if you don’t hit 1900 you’re a lazy bum. However, many people in litigation were constantly asking for work and, in many cases, it just wasn’t there. It would have been far more classy for the firm to have admitted this up front and given us an early warning that they didn’t know how bonuses would be calculated, especially with the layoffs.

(hidden for your protection)

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