Associate Bonus Watch 2009

Year-End Bonus Open Thread: Cravath Leads But Will Anybody Follow?

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Monday, Cravath kicked off bonus season. Cravath’s announcement started a fresh round of bonus speculation.
We previewed bonus season in October. Before Cravath came out with its bonuses, we wrote:

The most common speculation we’ve heard is that this bonus season will defy the follow-the-leader market matching of the past. People expect that firms in a stronger financial position will pay more than firms in a weaker financial position. It sounds like simple economics, but we can’t remember the last time there was systemic bonus separation among top law firms.

Ashby Jones of the WSJ Law Blog had a similar thought after Monday’s news:

But the question on our minds: Will others follow in step with Cravath? In previous years, most firms have fallen right in line with the first mover. (Last year was an exception, though, with the lion’s share of firms giving bonuses equal to half of what Skadden paid out.)

After the jump, let’s see what others in the legal industry are saying about the future.


The New York Law Journal got one Biglaw partner to express shock and horror at Cravath’s bonus:

The head of one major New York law firm, who requested anonymity, said he was “quite honestly surprised that a major New York firm was paying bonuses this year.”
The partner said he would expect a negative reaction from clients on “any bonuses being paid in the current economy.” He said he expected that a decision to pay bonuses “would have been deferred for some number of months.”

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Funny, if Mr. Anonymous Partner really thinks clients will disapprove of bonuses, then why doesn’t he come out and say his firm won’t be paying them? It’s what the clients want, right?
I suspect that Mr. Anonymous Partner was trying to control the narrative after the Cravath decision, but the few facts we have suggest that his expectations were moronic misguided even before Cravath announced.
DLA Piper — which employs 3,500 lawyers worldwide — announced that it would be paying bonuses on October 5th. Did Mr. Anonymous Partner really think that the nearly 250 attorneys who work for DLA in New York were going to get a bonus but 545 lawyers at Cravath were going to get squat?
Meanwhile, this commenter captures the overwhelming reaction to the “clients care about associate bonuses” myth that we keep hearing:

Clients are more likely to complain about bills and demand alternative fee arrangements than to call a partner and ask about the 15k paid to a third year assoc.

There is more than one way to spin the Cravath bonus story. Check out this quote, once again given by a firm that doesn’t want to go on the record:

“Everybody has been waiting for the first shoe to drop,” said the chair of another large New York firm, who also requested anonymity. “I think everybody has been assuming bonuses would not match last year. I think there’s still an open question whether the firms that have had a really good year … will want to differentiate themselves, but I personally doubt it.”

When that firm announces its bonuses, I hope the memo goes something like this:

Sponsored

As you all know, these are difficult economic times. Despite the recession, Me, Myself & I had a great year. Therefore, we are happy to announce that we will be able to make bonus payments to all of our hardworking employees.
We could make bonus payments in accordance with our stunning success. We could send a signal to the legal community that we hire the best lawyers and offer the best compensation package for top talent. People worked really hard this year through a difficult economic climate, and we could reward them.
But we’re not stupid. Eligibility for the bonus is tied to associate performance, but there’s no reason whatsoever for the bonus payment to be tied to the health and success of the firm. No, no, no. We’ll pay what our struggling competitors pay. We do not want to differentiate ourselves.

We are already fielding a lot of speculation about what firms like Skadden and S&C will pay. But whether these firms will play follow-the-leader is anyone’s guess.
It’s going to be an interesting holiday season.
After Cravath: What Happens Next in Bonusland? [WSJ Law Blog]
As Cravath Kicks off Bonus Season, Will Clients Disapprove? [New York Law Journal]
Earlier: Breaking: Cravath Bonuses Are Out (and Down)
Open Thread: Let’s Talk Bonuses
DLA Piper Previews the 2009 Bonus Season

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