Over the holiday break, Irell & Manella announced its associate bonuses. Multiple sources are telling us that the Irell bonuses doubled the bonuses offered by Cravath, Sullivan & Cromwell, or their followers.
That’s great news, but Irell associates are not particularly impressed. Irell doubled the small bonuses of Cravath and S&C last year, too. And since Cravath et al. paid essentially the same bonus as last year, Irell associates ended up with the same bonus as last year, notwithstanding any increase in profit the firm may have achieved in 2010 over 2009.
Still, Irell is following a proven strategy to get noticed. Remember, it wasn’t all that long ago that Cravath was the most prestigious firm (according to the Vault rankings). But then Wachtell started consistently blowing Cravath away in terms of compensation, and now the Cravath’s and S&C’s of the world seem to be just playing for second place. The same thing could be happening to Irell: the firm shot up from #50 to #37 in the most recent Vault rankings, and I’d imagine that another year of paying double the market will help Irell continue its rise.
Actually, does Cravath really even constitute the “market” for top-end Biglaw associate compensation anymore? In 2008, Skadden doubled Cravath’s bonuses. In 2009, Cravath took advantage of a cratering economy to push bonuses to new lows, but there were still firms like Irell that found a way to beat the Cravath bonuses. And during the 2010 bonus season, it feels like the only firms even pretending that Cravath pays top associate compensation are the huge ones that really want to keep the associate compensation market as depressed as possible.
Let’s make a list of the firms that can see the Cravath bonuses in their rearview mirrors. We’ll get you started, and hopefully you can fill us in on anybody we’ve missed….
To be fair, there are many leading law firms that have gleefully followed along in Cravath’s bonus wake, by matching or essentially matching the Cravath payout. These firms have names you know: Sullivan & Cromwell, Davis Polk, Simpson Thacher, Skadden, Cleary, etc. With all those white shoes stacked neatly in Cravath’s corner, it’d be easy to say that Cravath has once again set the market (or at least the “NYC lockstep firm market”).
But this year it feels a little bit like Cravath has set a minimum number that other firms are free to blow past. And other firms are blowing past that the Cravath numbers.
It’s not just Wachtell (whose announcement we haven’t heard about yet — email us or text us if you have). Irell doubled, Boeis shattered, and even Cahill bested the Cravath bonuses. Cahill is in the Am Law 200, and it’s paying out a bigger bonus than Cravath. I bet there is a Harvard grad at Cravath who secretly made fun of his NYU friend who went to Cahill who isn’t laughing so hard right now.
And yes, we hear the groans emanating from Cravath’s recruitment partner. I listed just three “small” firms — “boutiques,” if you will, all which have around 200 lawyers. Behemoths like Skadden have over 1800 attorneys, according to the Am Law 100.
But let’s remember that Cravath itself isn’t all that big. The firm has just under 500 lawyers.
And if size does matter that much, we can’t forget Kirkland & Ellis or Sidley Austin. Both of these firms are behemoths with more than 1,000 attorneys. Sure, they aren’t straight lockstep firms. But as we reported previously, many associates at these firms are reporting better bonuses than what associates at Cravath are receiving. And the few who are not are generally saying that they received a Cravath-level bonus, not a whole lot less. That sure sounds like Cravath is being treated as a price floor as opposed to a price ceiling.
Cravath’s claim that it offers a “offers a competitive salary,” which is what’s on the Cravath website, is certainly still accurate. Only a handful of firms, like Boies Schiller and Wachtell Lipton, offer base salaries higher than the $160K scale. But would it perhaps be more accurate for the CSM website to now read, “Cravath offers competitive compensation for firms of more than 400 lawyers, most of them based in New York City, who still follow a strict lockstep system, except for that one time two years ago.”
And there are a lot of shoes, white or otherwise, still to drop. Please correct me if I’m wrong, but we haven’t yet heard about Wachtell, Covington, and Latham (just to name a few). Would it shock you if all three of those firms end up paying a bigger bonus than Cravath? Would it shock you if Morgan Lewis, which already told its associates that it set aside more money for bonuses this year than last year, beat the Cravath bonuses in some significant way?
Who’s missing? Who has already paid out a better-than-Cravath bonus, or who do you have reason to believe will pay out a better-than-Cravath bonus? Let us know in the comments, send in an email to email@example.com, or text us at 646-820-TIPS.
We might be in 2011, but the 2010 bonus season is far from over.
Earlier: Associate Bonus Watch 2010