Top Biglaw Stories of 2008: #4 (Business)
Continuing with our rundown of the top ten Biglaw stories of 2008, we reach our fourth place story on the business end of things: the dramatic reduction of associate bonuses.
Bonus news is always a big deal around these parts, and based on the way that the 2008 bonus season started, it looked like there might be a fight for control of the New York market. Skadden led off with bonuses that matched 2006 levels (or 2007 levels, minus the “special bonus” portion). At the time, Skadden wasn’t sure they’d be at the top of the market. Skadden’s bonus memo included the following language:
The Firm has historically paid its associates at the “top of the market” in their respective local markets. While we do not know what other firms will do this year with regard to paying a supplemental bonus, we believe that our bonuses this year should be limited to the year-end discretionary bonus. What we will do in the future years, will, of course, depend on business conditions at the time and competitive compensation.
There were more than a few people who thought other firms might come in above Skadden. That didn’t happen. Instead, Cravath happened.
Half-Skadden sets the market, after the jump.
It is still kind of shocking that Cravath announced reduced bonuses just one day after Skadden came out with its bonus scheme. You really have to go back and look at the Cravath bonus memo to get the full sense of how surprising the decision was:
As a result of the deterioration of the business environment, the Firm’s financial performance in 2008 will not be in line with those earlier years. While the Firm believes that we should pay year-end bonuses this year, in light of the current business climate we do not think it is appropriate to pay the full bonuses that were paid in 2006 and 2007 or the additional supplemental bonuses paid in 2007….Given the uncertainty of the economy and the business climate going forward, we will not be able to address the issue of whether there will be any year-end bonuses in 2009 until this time next year. However, associates should be prepared for the likelihood that the economy and the Firm’s financial performance next year will not show a significant improvement over this year and they may receive significantly reduced or no year-end bonuses next year.
In one day, Cravath turned the market on its head. And there was no going back. Under the cover of Cravath, firm after firm after firm went with Cravath’s lower bonus scale, ceding “top of the market” status to Skadden.
And quickly all of the normal indicators about a firm’s financial health went out the window when it came to associate bonuses. High profile bailout work? Match Cravath. Incredibly busy bankruptcy department? Match Cravath. Paying your associates in L.A. at Skadden levels? Match Cravath in New York.
So why is the bonus situation only our fourth-place Biglaw business story? Because Cravath wasn’t the only thing out there giving every firm cover for cutting associate bonuses. Sitting in the middle of “the worst economic crisis since the Great Depression,” there were lots of other things firms needed to do to bring their costs under control. In this market, a “half-Skadden” bonus is a lot better than some of the other pains that were passed around the Biglaw community.
Earlier: Associate Bonus Watch: Here Comes Skadden
Associate Bonus Watch: Cravath Offers Less Than Skadden
(19) Comments
Comments
blah blah
Seriously guys, its a new year, cut the top stories out.
- I'm just saying
seconding 2.
wgwag
Hamburglar,
You are not funny, clever or anything remotely related to anything positive.
- Guest
Seconding 5
FIRST FUCKOS!!!
I don't mind the top stories. It's nice to have "year in review" stuff.
But if you don't like these kinds of posts, don't read them. They are all marked with a conspicuous "2008 in Review" logo.
Thirding 2. Should have started this series on 12/15, so you could finish by Wednesday. Ellie procrastinated, and now we're two days into the new year at this list is at #4. And there are like 8 lists or something. At this rate, we're going to get to #1s sometime in June.
Ellie, I had thought people were too harsh on you, but could you seriously try to act like you know what you're doing?
Pathetic.
9 - His name is "Elie" (one L), not "Ellie."
The lists will be done by the first full week in January. This makes sense considering that many big stories (like the pay freeze stuff) broke in December.
So relax. Don't read the year in review posts if you don't want to. Just skip them. Life is too short.
10 = insecure in his manhood.
People on this board complain about the stupidest things, from the timing of posts (see 9) to the spelling of writer's names (see 10).
I am fine with the reduced bonuses if it means I get to keep my job!
Anyone else notice that we can't comment on the Lateral Link Job of the Week posts?
At least Kinney has the stones to allow commenting on its Asia Chronicles posts - and as a result, there's been some interesting discussion there.
If you go to the description of the latest Lateral Link post, you'll see this (cutting and pasting a few of the choice bullet points):
- Experience in the drafting and negotiation of commercial agreements for technology companies, including hardware and software purchase agreements, domestic and international distribution/reseller agreements, OEM agreements, license agreements, consulting agreements, vendor agreements and other similar agreements.
- Public company periodic reporting experience
- Experience with managing intellectual property litigation.
- Experience with broader employment, corporate governance, international operations and/or other regulatory matters preferred.
- Must thrive under pressure and be prepared to maintain exceptional professionalism and manage multiple projects and priorities in an exciting, fast-paced and dynamic business environment.
- “The Customer Comes First” Attitude: Candidate will demonstrate passionate commitment to servicing the needs of the other employees of Company who are the “customers” of the legal department.
- Indomitable work ethic: Candidate can reject setbacks and enthusiastically persists until ambitious goals are achieved. The successful candidate will be resourceful and innovative at tackling complex challenges in a timely manner.
So, to summarize, they want someone with significant background in IP litigation, commercial and IP transactions, AND corporate securities work. And, they want that guy to work 80 hours a week on a permanent basis and love it. Gee, sounds like a realistic search, there are lots of people around with substantial experience in these widely varying areas - and let me guess, they're looking for someone with 10 years of experience but paying the wage of a first year? Sounds like a job that anyone reading this board would just LOVE to have!
Lateral Link guys - it would be a useful service if you could try to distinguish between the dreams and the must-haves of these positions so we know whether or not to invest any time even discussing them.
2009 - Year of the SHEEP
13 Has the right attitude. All of these firms that have started pay and cut out bonuses are trend setters. The days of pay raises and bonuses are over. End of story. Kind of like the lies that led us to war in Iraq. This is a lead up to pushing your wages down not due to a down economy. It is due to the permanent globalization. Your glass and ivory tower has been shattered as jobs are outsourced and you are no longer needed. You think you are untouchable but you will be touched. Like a freight train. Take your little darlings out of the private schools and give up that golf club membership. Please come back in 2 years if you can afford your high speed internet connection and tell me how wrong I was. LMAO!!!
WTF? Why did this story show up in my RSS feed three times?
Elie ate all the SkaddenDC cookies.
10: Elie, it's really weak to comment on your own blog anonymously.