We’ve tentatively started the Associate Bonus Watch for 2008, with news of Orrick’s and McDermott’s bonus plans, and the not-really-news that Morgan Lewis will not make bonus decisions until after the holidays.
With the dismal economy and the widespread law firm layoffs, we speculated last month that regular bonuses may be less than last year, and “special” bonuses would likely disappear. The New York Law Journal agrees with us, and suggests two other reasons for it:
The scale of the expense and the almost compulsory nature of the market are widely resented by partners. But they also realize bonuses play a huge role in associate morale, recruitment and retention. Most managing partners who spoke to the Law Journal about bonuses cited potential problems with associates in requesting anonymity. But this year they all also mentioned another interest group keeping a watchful eye on bonuses: clients.
So, reason one: If they give you a bonus, you might tell someone, um, like Above The Law. And reason two: pressure from clients to control costs. Anonymous firm leaders say they fear the effect a big bonus announcement would have on their fee negotiations with belt-tightening clients, especially those in the financial sector.
Orrick chairman Ralph Baxter notes that while Orrick will still pay bonuses, “performance factors, including billable hours, will reduce the number of associates at the firm” who actually get a bonus.
The article suggests that the dismal economy could provide the opportunity that some firms have been looking to escape the bonus bidding war, and eliminate associate bonuses all together. We know you’re worried. In a recent Lateral Link survey by Justin Bernold, one out of every thirteen respondents was unsure when, or if, bonuses would be paid. But as The New York Law Journal notes:
Of course, much will depend on what Cravath and Sullivan & Cromwell do.
As always, we welcome bonus news and memos via email (subject line: “Associate Bonus Watch”).
Firms Rethink the Value Of Associate Bonuses [New York Law Journal]