Clifford Chance to Partners: Brother, Can You Spare… £100,000?
Clifford Chance leadership to the rank-and-file partnership: “Partners, spread the wallets, so we can smell the juicy insides.”
Associates, we feel your pain: slashed bonuses and salary freezes are bad news. But things could be worse: imagine having to pay your firm for the privilege of working there:
[A]s a Christmas “bonus” this year, partners at Clifford Chance were each required to make a capital contribution of £100,000 (roughly $150,000). Ouch.
Through a spokesperson, Clifford Chance declined to comment. But, if true, the news would not be completely shocking. The firm has done at least two rounds of layoffs, and they paid bonuses that were down sharply from prior years (although, in fairness to CC, at market levels for 2008).
If true, Clifford wouldn’t be the only firm looking to its partners for financing. As previously discussed, because of super-tight credit markets and the high cost of borrowing, more firms are financing their operations by tapping partner wallets. See, e.g., DLA Piper (letting some income partners become equity partners, if they can cough up capital contributions of up to $150,000).
Associates: next time you complain about greedy partners slashing your pay, consider the possibility that they’re suffering too in this economy. They’re trying to safely navigate the recessionary shoals, just like the rest of us. Some of the measures they’ve been taking, like pay freezes and reduced bonuses, may just be prudent planning. Better to have a smaller paycheck than no paycheck at all.
Are you aware of other firms that are hitting up their partners for cash in these dire times? Drop us a line, by email (subject line: “[Firm Name]: Capital Contribution”). Thanks.
Earlier: Biglaw: Welcome to the Credit Crunch
Prior ATL coverage of Clifford Chance
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Classy, David.
First!
First
FIRST again!!!
wowza... first sucks
first!!!!
Lat, you totally blow for lending credence to the most disgusting, asinine poster ever. You should be whipped with a wet noodle.
I'm NOT first
All you non-first firsts need to chillax.
Wow, some major respect to the juicy insides poster.
I did not know that
BITCH SPREAD DEM BUTT CHEEKS SO I CAN SMELL THE JUICY INSIDES was British
BITCH SPREAD DEM BUTT CHEEKS SO I CAN SMELL THE JUICY INSIDES
W. Churchill
I can't believe you quoted "spread the cheeks" moron. That's it. I've had enough of the blog. I'm out of here.
Good opening sentence, Elie.
Oh, wait.... it's by David! Quelle surprise!
On a more serious level, many law firms are going to be reaching deep in their partners' pockets for cash in the form of mandatory capital contributions given the credit crunch. And you associates wonder why partners don't seem to care about you -- it's not that they don't care about you -- they don't -- but they're being squeezed. Sucks to be a partner right now.
Huh, abnormal number of first claims. Was ATL slow on their upload, ot did everyone rush to comment at once?
Lat, was that a reference to the buttcheeks guy we all hate and would like kicked off from our planet? Damn.
What happened to all the clueless 1Ls who think that partners always take earnings out of law firms (and thus lower bonuses to associates means more take-home money for partners) and never leave or put cash in?
Partner departures from the Clifford chance's DC office now make some sense.
"sucks to be a partner right now"
umm, no.
Those butt CHEEKY Brits and their juicy contributions from partners.
This happens because partners over pay themselves during good times and figure they'll just get a bank loan later if they need it. Ooops. Bank loans either aren't available or are only available on very bad terms.
How does this work?
I cant imagine the partners all have $150k sitting around and can write a check to the firm.
Does anyone know whether S&C, DPW, STB, CGSH, WGM, PW, K&E are paying usual raises this year?
17,
If you have no book and no opportunity for a lateral partnership elsewhere and your partnership is asking you for a massive capital injection, what would you do? Don't forget, you have kids in expensive colleges and your McMansion is mortgaged to the hilt and you have a wife with expensive tastes, including a BMW SUV.
Yes, sucks to be a partner, right?
Dumbass. Spread those buttcheeks because that's all you're good for.
Tool.
One could argue that requiring a capital call in order to preemptively provide liquidity for a firm is a sound business practice in a year such as this. Beats having to negotiate against the wall in obtaining a larger bank line.
S&C has advanced salaries by the normal class year amounts.
What are Clifford Chance's PPP? 2 million or some where thereaboout? Yea, I feel real sorry for these filthy rich fucks because they have to cough up a measly $100k to keep the money machine going. Boo fucking hoo.
Especailly the ones that were partners from 2000 to 2008 when PPP freakin' skyrockted.
anyone know about layoffs at Cahill?
anyone know about layoffs at Cahill?
So, Cravath, Skadden and S&C are raising salaries as usual - anyone else? Anybody? Bueller?
20,
It's called personal bank loans.
Oh wait, they aren't easily available or are based on high interest rates.
Wait, let's try this again. How about HELOC? No, the house is mortgaged to the hilt.
How about my retirement plan? Against the law to withdraw the funds without a penalty.
How about life insurance? Hmm....
Yeah, the life of a partner is all roses.
20 - that's exactly right. If your collecting 2 million annually, you better have $100k sitting around somewhere.
Love the opening line Lat...
25, PPP does not equal post-tax take-home draw. PPP is also an average so by definition many partners make less than that.
HTH.
I heard Thelen is asking for capital contributions.
God forbid they reduce their draw by $100K over 12 months. How would they ever get by on 900K v's 1M? Oh but the PPP ramifications!
ATL in the partners' corner?
"Associates: next time you complain about greedy partners slashing your pay, consider the possibility that they're suffering too in this economy. They're trying to safely navigate the recessionary shoals, just like the rest of us."
Oh the fucking horror!!!! I only make $900k! How on earth will I manage?
20, typically these are announced months before the checks are due, and when they're big amounts, they sometimes split them up and allow partial payment one year and partial payment another year. Sometimes partial payment plans are allowed only for younger partners. All firms pay interest on capital, generally at a pretty high rate (prime + a few percent), so this is pretty good savings. Many partners already have more capital in firms than they are required. Finally, notwithstanding the credit markets, partners at firms can borrow at well below prime. Whatever firm lends to the firm will have an arrangement where they get paid by the firm out of draw if the partner defaults. So effectively it's secured. I have a 1% loan from Citi on my capital account, and they're still writing these loans.
BLART!
37 - Great comment. Very informative.
Although this might not be clear from Lat's post, CC has advanced salaries as usual.
38, it has no effect on PPP. When you withhold for capital, it doesn't change PPP. PPP is calculated before capital contributions.
34, it has no effect on PPP. When you withhold for capital, it doesn't change PPP. PPP is calculated before capital contributions.
37 -- Do you really think a CC partner can borrow money from the capital when their asking for a contribution? Think this through, this is a sign of the apocolypse. CC must need the cash desperately (or must be predicting a period where they may need this cash desperately) to make payroll, or pay rent, or otherwise fund their operations.
Cahill layoffs anyone?
Firms known to have advanced salaries as usual:
Cravath
Skadden
Sullivan
Clifford Chance
Additions?
Clifford Chance layoffs anyone?
Al Franken is going to be a United States Senator. Nothing really matters anymore.
How long until Clifford Chance requires its associates to make a $150,000 contribution to the partnership taken out of their paychecks? Not long, I think.
45 -- add Jones Day to the list. Advanced salaries plus big stepups in lieu of a 2008 bonus.
45, Dechert
29. Many banks are still offering very good pricing at the same structures as last year on capital contribution loans. Citi is offering partners at a large number of big firms 1-month LIBOR plus 150 bps to 225 bps, which comes out to well under 3%. Others are offering Prime, which is 3.25%. Most are still interest only for 3-years before amortizing on a 5-year schedule based on annual distributions.
37. Citi is going to be putting a floor of 2% on new capital loans for a lot of firms starting this year. It was standard procedure for a lot of other banks with capital loans, but Citi is just starting. Also, firm's don't necessarily pay out of your draw if you default, many firms actually pay out of your capital account. With some firms, the firm will actually handle all of the payments, interest and principal for you from your draw.
You forget one drawback of the capital accounts, though, which we've seen this year, many partners leaving firms have had lower than expected capital payouts as they have had to make pension contributions on their way out the door. This has meant that some partners have not been able to fully pay off their capital loans with their capital distribution and have had to refinance the remaining amount as an unsecured loan at higher interest rates.
"How about my retirement plan? Against the law to withdraw the funds without a penalty."
You're an idiot if you forgot you can take a loan for up to half the balance without penalty. Works great to pay down loans, too. Who would you rather pay interest to: yourself, or SallieMae?
Firms known to have advanced salaries as usual:
Cravath
Skadden
Sullivan
Clifford Chance
Dechert
Jones Day
Additions?
"How about my retirement plan? Against the law to withdraw the funds without a penalty."
You're an idiot if you forgot you can take a loan for up to half the balance without penalty. Works great to pay down loans, too. Who would you rather pay interest to: yourself, or SallieMae?
43 = mysTTTal
its THEY'RE not THEIR
retard
180
51 - Wow thanks, another excellent and informative comment.
Keep it up, and maybe the comments here will reach the quality of the WSJ Law Blog comments.
47, I live in MN. I want to cry. I am currently looking to lateral out of the state because of the pure shame of being represented by Al Franken. And when I leave I'm not selling my house, I'm just going to burn it. You go to hell Minnesota, you go straight to hell.
Clifford Chance's layoffs (originally reported by ATL and Legal Intelligencer, respectively) are among the 1,762 and counting on the BigLaw Layoff Tracker at http://www.lawshucks.com
43. I think you misread 37. the partner is not borrowing from the capital. They are borrowing from the bank. What the bank gets is a letter of direction from the firm, saying that if the partner leaves the partnership for any reason, the bank gets paid back the capital to repay their loan before the partner sees any of it returned to him/her.
43 is absolutely right. CC has 613 partners, so the capital call amounts to $91,950,000. There is no reason to do this, UNLESS cash flow (from bill collection) is inadequate to cover fixed costs (rent+associate salaries+staff salaries). That is not good, esp as there is little prospect of a collections 'surge' in the current environment. To add insult to injury, if cash flow from operations isn't covering fixed, none of the partners is getting paid (while reaching deep down to pay the fixed costs).
Whiny CC associates - your partners are making direct transfers to pay your salary. Still think we don't case?
V10 partner
Back in 2001 my mentor partner called me into his office. He was writing a $25K check back to the firm. He said "remember how we promised you partner in two years - looks like five now." Truer words were never spoken! All those on partner track, chillaxinate...
Give me a break. A measly $150k from partners who make more than ten times that on average? Even a brand new partner who makes ONE THIRD of the average at CC will still make $500k AFTER the contribution, and that's assuming she never gets it back! Boo-fucking-hoo for the poor partners.
Any news on layoffs at Cahill?
K&E advanced salaries as normal.
Firms known to have advanced salaries as usual:
Cravath
Skadden
Sullivan
Clifford Chance
Dechert
Jones Day
Kirkland
Additions?
57. Sounds like the right move. I thought Schwarzenegger was bad and Ventura frightened me....but Franken...FRANKEN...makes me weep for the future of the republic.
Have there actually been layoffs at Cahill or is there just one annoying person asking about them in the comments section of every post?
I hope I am wrong but this looks like the begining of the end for CC. How many rainmakers, who always have options regardless of the economic climate, are going to pony up their own money when they can move to any number of firms in better finaincial health. As these partners leave to protect their own assets (asses), the firm's business dries up.
Biglaw is a high-end pyramid scheme that is incredibly fragile and requiring capital contributions will almoat always cause the pyramid to collapse.
68 - I have it on good authority that there either may or may not be layoffs at Cahill.
I've heard rumors of imminent Cahill layoffs, too. No bonus or salary news, and everyone there is worried. I've heard it from 2 different people there.
68 - I have it on good authority that there either may or may not be layoffs at Cahill.
Wilmer is also asking for capital contributions. No, I'm not going to email you, because I'm not supposed to know this information.
71 - Wrong.
www.reedsmithcreditorscommittee.com will be functional at midnight.
74 - Do you know differently? I've also heard some people there say they were nervous (not 71)
Where's the money Lebowski?
CC is doing the right thing... there have been relatively few layoffs at CC, salaries were not frozen and the firm will pay market bonuses... the pain is being borne by the CC equity partners... they are doing their best to protect the associates and to weather the storm... Money is coming out of their pockets ... CC is a good employer and hopefully this move does not signify the "beginning of the end"
MLB raised salaries - add them to the list.
Not the "beginning of the end" as Churchill said, this may be the "end of the beginning." That is, the end of the time where CC attempted to retain large amounts of associates and weather the storm.
78:
You are clueless. If CC partners are stumping up, it means the firm is not covering its fixed costs, and partners aren't receiving draws. When partners don't get paid, those with portable business leave - quickly. Left behind are those partners who can't move. The partners left behind won't be able to cover your salary gap for more than a few months, after which: Heller, TPW et al.
I agree with 78 -- CC has been really good to its associates - Glad to see partners looking out for associates - something you rarely see at BIGLAW
I know you have pay to play, but $150k?
- Magic Circle Jerk
54,
When you borrow from your retirement investments, you're not just paying interest to yourself, you're foregoing investment growth. Who is the moron again?
63,
You're conflating profits per partner estimates (which are suspect ) and average compensation, and even if PPP equaled average comp, you would be talking about mean compensation rather than median. Junior partners at Clifford Chance are not making a buck or even close to a buck.
76 - Yes. We were nervous, now we're not.
81, CC US has the backing of its global balance sheet and the rest of the firm's ops... how many US firms can lean on successful sister practices around the world? The cap contributions are a protective measure because clients in NY are being really slow to pay bills right now... those partners will get their money back in the end.. CC will hang on and will be around as many of its competitors merge or fold... that's my prediction
78:
You are clueless. If CC partners are stumping up, it means the firm is not covering its fixed costs, and partners aren't receiving draws. When partners don't get paid, those with portable business leave - quickly. Left behind are those partners who can't move. The partners left behind won't be able to cover your salary gap for more than a few months, after which: Heller, TPW et al.
86:
If there was excess cash flow in the CC global network, it would be transferred to NY to cover CC NY's slow payers. There is not, which is why you have a (sudden) capital call. This is not good.
86, the capital call was not sudden ... it was planned and is meant to cover costs until things loosen up -- the firm is in v. good shape and won't fold unless 2009 and 2010 suck as bad or worse than 2008... in which case, very few firms will be around in their current form
89: if monthly receipts don't at least cover monthly costs, you are not in v. good shape
89- Hasn't CC's huge recent PPP come at the cost of operating with almost-no safety cushion?
Disgusting reference, Lat. Please stay above that garbage.
Associates with the "boo-hoo" comments are funny. Assuming you want to be a partner in your firm someday, you will want to earn as much as possible once you are one. That's why you're in business in that kind of organization. Most of the comments here oversimplify in their references to PPP. If you are an associate, you are an employee of the firm and that is all. You are there to make money for the partners and to learn. They're not your parents, and they don't actually owe you anything. And if you do ever make it to partner, you sure as hell won't take kindly to a bunch of whiny first through seventh year lawyers begrudging you the living you have worked your ass off for. Good luck on that partnership track -- with attitudes like yours, you're going to need it.
Firms known to have paid more than your firm:
Wachtell
Skadden
Skadden
Skadden
Skadden
Skadden
Skadden
Skadden
Skadden
Skadden
Skadden
Skadden
Skadden
Skadden
Skadden
Additions?
Partner: What? What? In the But??!!!
idiots all...non-equity, junior partners do not make capital contributions. non-equity = no equity....unreal. no wonder you troll these boards instead of working at S&C or Wachtell and actually executing quality work, probably couldn't get jobs there anyway. And the $150k new Christmas cash was in addition to the existing capital in the business. my understanding is the average top of the lock partner is now in for a cool million US a piece.
Firm cash flow is not even. Collections ramp up towards the end of the firm's fiscal year---with smaller monthly collection levels at the beginning of the fiscal year and bumper collection months at the end. Operating costs (i.e., fixed costs) are constant. Many firms finance the first few months of the year on a line of credit until their collections "catch up" to operating expenses. Credit is more expensive now than last year (and banks must be nervous with law firms failing.) CC may just be looking to its partners to fund the first few months of the year, rather than a credit line. This does not necessarily mean the "beginning of the end."
Firms known to have advanced salaries as usual:
Cravath
Skadden
Sullivan
Clifford Chance
Dechert
Jones Day
Kirkland
Linklaters
Additions?
Just spoke with a partner at CC. Apparently this "capital call" doesn't actually require each partner to pony up any cash. CC is just increasing its borrowings to the tune of 100k GBP per partner. So in the scenario CC were to go bust, each partner would be poorer by 100k GBP.
As the SBA President, I just want to say that quoting the Butt Cheeks guy was HILARIOUS!!!!! Keep up the good work!
-SBA President
Re: Franken:
When I was living in Iowa, Gopher from the Love Boat got elected to Congress. Anyone of moderate fame from entertainment can get elected it appears.