Dos.

Cravath's bonuses are a travesty. It's unfair, and I hope other firms are nicer to their associates.

Who represents ATL in its lawsuit? I fear if Elie writes the briefs himself, ATL actually might lose the lawsuit...

MWE?

Mystal,

When you write, do you just dip the tip of your tusk in an ink well and write on parchment?

Curiously yours,

The Most Interesting Eskimo in the World

So clients care about how much associates get paid, but not that partners get paid 10+ times more than those associates?

Bonuses this year should be $0, except for bankruptcy attorneys or those billing over 2400 hrs.

Instead, firms should be lowering billable rates. But they are too stupid for that.

ShaFeef:
Are you getting a bonus from Kash this year?

I've got the names of three firms that will be offering significantly higher bonuses than Cravath.

I'll remind mysTTTal that DLA also cut salaries and had layoffs this year.

Ya know what clients SHOULD, and perhaps do, care about - - that greedy partners have frozen associate salaries (going on year 2 of the freeze) but have repeatedly INCREASED those associates' billable rates. The fact is, some firms are doing ok, even in this economy, but have used the economy as an pre-text for a blatant money grab.

The end of the crisis refunds the certain whale into the mark. Higher than competing bonus overlaps the end of the crisis within the dive. Higher than competing bonus buys the end of the crisis beneath whatever clipping chancellor. Higher than competing bonus recovers beneath the end of the crisis. A fold requisite stops below higher than competing bonus.

Dont kid yourself - none of these firms are doing well this year. Even plaintiffs' firms are having "quiet meetings" internally.

I should move to the financial sector where the bonuses have more commas in them. Plus, I hear you get your tax money back.

If it were up to me, I would handle bonuses in the following manner:

Call associate into conference room. Show associate three envelopes on the conference room table. Tell associate that one envelope contains their paycheck. Another envelope contains a $20K bonus. And the last envelope contains a pink slip. I would tell the associate that he/she is free to take the paycheck and walk away without a bonus. However, if a bonus is desired, he/she will have to chance drawing the envelope containing the pink slip, which will be enforced. I bet this model would solve the bonus dilemma of these firms.

Not only did DLA freeze and cut salaries, but you keep referring to DLA's statement about bonuses as meaning that all "250 lawyers in the new york office" will be getting one. Never, ever has DLA Piper, or Piper Rudnick or whatever given bonuses to all associates--there has always been a minimum hours requirement, among others, and nothing indicates they would change that.

16 - absolutely brilliant. FTW.

My aunt used to work for the late Senator John Heinz. She recently told me that PE agreed to co-host a Manhattan fundraiser for Heinz in the 1980s. He promised to raise $25-50k from his Sullivan & Cromwell partners.

The event produced less than twenty attendees, half of whom were comped. And the campaign ended up incurring a loss on the night. Mr. "Peer Firm" struck out and hasn't been taken seriously since. Evidently a similar incident happened with Al D'Amato but I never got the details.

Law firms might also want to differentiate themselves by having higher profits. I imagine the partner meeting going like this:

Partner A: "Cravath has paid small bonuses, we can really show them up by paying more this year!"

Partner B: "That's one idea. The alternative is we.... keep the money for ourselves."

Partner A: "Let's put it to a vote, all in favor of keeping the money for ourselves? And all opposed? Motion to keep the money for ourselves carried unanimously."

I mean seriously - why on earth would they pay more than they have to? To stay in the good graces of law students desperate for jobs? To convince associates not to quite in outrage over their bonuses and go work for the firm down the street that pays the same bonuses and probably isn't hiring anyway? Because anonymous kids in the comments on ATL will say mean things about them? Oh noes.

Douchie, thank you for replacing your hideous mug with a better looking picture. Your content remains dull and uninspiring, however.

-- ATL readers everywhere

PE,

I like your plan. It's like in the 1980 movie Flash Gordon, where Flash and Prince Barin had to place their hands inside a hole in a tree on planet Arboria, only to risk being poisoned by the creature within.

Sad to say, most firms will pay less than Cravath and more people will fall short of the bonus standard than in previous years. Anyone getting more than 10K has done well [sigh].

For once I agree with PE. Your bonus, associates, is that you may keep your job. No whining. If you don't like it, don't let the door hit you in the vagina on the way out.

20, you're the only person here who realizes that compensation is based on supply and demand, not how much in profits the business is making. And right now, associates should be happy they're not getting a salary cut.

10 - Wachtell, Skadden, & Paul Weiss? Please confirm.

I actually think Cravath is being generous, given that they have not reduced salaries, eliminated day care or whatever.

I suspect that where Cravath will cut back is in hiring. Can anyone really explain why anyone would hire a class of 2010?

Just replace "Me Myself & I" with "McDermott Will & Emery" and you pretty much have last December's bonus memo. Also probably this year's.

It strikes me that Cravath should just take only the super-qualified applicants, maybe 20 a year, jack up starting salary to $400k-$500k and get the lawyers they want. Wachtel would follow or top it. A few other firms might follow.

Plain fact of the matter is that most of Cravath's clients don't care what the bill is. Of course they gripe, but there is a reason they are at Cravath. Maybe it is the GC's dick size, or maybe it is a save-the-company matter. Maybe it is for good advice.

My guess is that super high salaries for a very few priviledged and/or talented kids is where they go.

Of course, I could be wrong.

29: You're so wrong that it redefines the word.

PE haz painted mee in a falce lite!

This comment is addressed to post no. 29.

Please check yourself into a substance abuse program. Clearly your abuse of crystal meth has impaired you from distinguishing between fantasy and reality.

Thanks for your reasoned analyses, 30.

How about no bonuses and start your associates on time?

The sentiment that hard-working associates should shut up and just be satisfied that they still have a job is disingenuous. Associates at firms who survived one or two rounds of layoffs have not had it easy. Most associates at my firm are billing more this year than they did last with with a poorer quality of life both in and out of the office. Partners are more inclined to take their stress over the economy out on associates who are working their tails off because they have been repeatedly advised that they "should be grateful that they still have a job." Frankly, I don't know a single associate at my firm who believes he/she is entitled to their job or is otherwise not grateful that he/she is still employed. So cut the crap with the "you should be grateful" guilt trip and give associates who are still busting their a** a break.

34 -- great plan if you want to build a firm of first-year attorneys and drive away anyone with experience.

The correct answer is get rid of automatic bonuses and give hefty bonuses to those associates who are still in demand and making their hours.

29: Clients don't want to pay the rates that it takes to make $160k/y associates profitable. What makes you think they'll want to pay what it takes for $500k/y associates?

If firms do anything, they'll decrease leverage and increase partner rates and/or number of partners (non-equity).

by all accounts that i have heard, cravath is taking the first part of 29's advice. i have heard from several people that cravath's 2010 summer class will be 10 to 15 people. that's down from 160 in 2008 and 120 in 2009

37, I think Cravath has enough money to do what it wants to do-- provided, of course, that they hire only a very limited number of associates.

38 -- makes sense as it will take a few years to start deferred associates and to get staffing levels back to optimal level

39: Don't be ridiculous. Many firms have "enough money to what it wants to do," but I'm arguing that there is no way that they "want to do" it.

Think about it. A firm would get the same benefit of high caliber associates if it paid them the market rate but made it clear that it was hiring limited numbers of associates and increasing the likelihood that those associates would make partner or at least non-equity partner. (1:1 leverage perhaps?). They could easily off-set the loss of revenue from the leveraged associates by charging more for partners, non-equity partners and mid-senior associates. (better training, higher caliber, etc. -- all the good stuff GC's like to say to their boards when justifying the money).

There is no reason to pay associates more than market to attract the best -- even if it were economically feasible. For instance, Wachtell pays its associates a fraction of what you're suggesting (market plus admittedly staggering bonuses), and their rates are effectively higher than any other firm.

41 - What you describe is the model that works for boutique firms like Susman, Keker, Kellogg Huber, etc. Everyone makes a ton of money at those places. Part of what makes it work is the willingness of a small number of lawyers to work long hours, take risks on contingency cases, and work with other alternative billing arrangements.

Can a large firm thrive with this model? Or do you mean that firms like CSM have to downsize significantly? Even Wachtell, though considered Biglaw, is small by comparison to most of its "peers."

Lookit, the real question isn't whether S&C or Skadden pays a higher bonus than Cravath.

Rather, it's when some entrepreneurial firm decides to imitate the investment banking model of paying a much lower base salary (say, $80-100 K for a first or second year associate) and a much higher bonus.

That firm really will earn kudos from me, at least.

One of PE's better ideas, no doubt. Bonuses are not really for rewarding good work (even though in good times, that's what firms pretend). Bonuses are for retention. Firms are currently experiencing too much retention, so why on earth any of them would gives bonuses is beyond me.

One of PE's better ideas, no doubt. Bonuses are not really for rewarding good work (even though in good times, that's what firms pretend). Bonuses are for retention. Firms are currently experiencing too much retention, so why on earth any of them would give bonuses is beyond me.

How is this not a 300-comment thread?

42: I'm thinking firms like Cravath, S&C and Skadden. The issue isn't downsizing, the issue is making more partners and reducing the number of associates. This can happen over time. No one, least of all me, is advocating the wholesale firing or promotion of associates. But I think the model could work in a big firm just as well as in a small firm. Frankly, at most big firms with which I am familiar, the individual groups are run as fiefdoms of partners or groups of partners. The one firm mentality exists only on an electronic plane.

46: Because the people that usually talk smack on ATL boards have nothing to blab about right now.

Every firm is desperately trying to de-leverage by getting rid of as many associates as they think they can. In that context, why would any firm want to step out and pay associates more?

Well, 29, I understand it was before you were born, but in the '80's Cravath preemptively stepped out in front and almost doubled associate salaries. Now look at their letterhead. They have many partners who started during that era when they were out ahead of practically everybody else. They got their quality lawyers.

It strikes me that the trick is to just limit the number of associates they take.

I'm with 46 - this didn't even manage to bring out the "associates are such entitled assholes" douchebags. I saw this hours ago and just checked again, sure there that there would be 300+ comments. WTF people.

49,

One reason is that they can finally achieve the compensation separation that they were trying to get with the bumps up to $160k/yr. For a measly $50k/partner (1:5 partner:associate ratio) they can tell the best law students/laterals that when Cravath stumbled they held strong. Just like some NY firms didn't freeze/reduce salaries when others did, just because they have cover to do so now doesn't mean they'll follow.

You would think bonus announcements will track PPP numbers. If PPP is expected to go up you would think that a firm would have to be crazy to pay Cravath bonuses. Yes, you want to get rid of crappy associates but you also want to keep the talented ones. And at the mid/senior level, you probably already stealth laid off the people you don't want. A big F-you to the associates who you chose to keep doesn't align well with your best interests.

Of course, believing the above does require a certain amount of Kool-Aid.

Also, de-leveraging through stealth layoffs allows you to determine which associates stay/go. Doing it through crappy bonuses ensures that the good ones leave and the crappy ones stay.

-52

The cost of a big law associate, in salary, benefits, overhead, and support, is about $300k for a 1st year and $400k for an 8th year. The notion that $10k makes an iota of difference is crazy. The total bonus pool at Cravath for all of their associates is equivalent to about one or two partner salaries. Across their 100 partners, that pool equals a wopping 2% of their individual income. The bonuses make very little difference to their bottom line. If they are so pressed for cash that they need to worry about whether to juice the bonus pool by $10k/head (which equates to under a half million bucks) then frankly they are desparate.

43 --

I agree, that would definitely be a much better business model. Of course, most law firms aren't very good at being a business (exhibit A -- making the vast majority of hiring decisions with regard to new associates after one year of law school and two years before those associates will start).

There firms that do follow this business model. Most of those are plaintiffs firms.

It's long past time for associates to unionize. It could double associates' salaries.

It's long past time for associates to unionize. It could double associates' salaries.

"I've got the names of three firms that will be offering significantly higher bonuses than Cravath."

Wachtell, Susman (& Godfrey), and Skadden. Are we really surprised here? Come on.

I heard that Sullivan and Davis Polk had a great year, with much better results than last year. I wonder if they will be a bit more generous....

Cravath had a good year, too, and this is what they got. So don't expect anything.