Yesterday, the deafening silence from Skadden, Davis Polk, Weil and others on spring bonuses was pierced by news that Cadwalader is currently considering whether to pay spring bonuses.

It’s the first fresh spring bonus news we’ve had in a while. It seems like Cravath’s announcement of springtime bonuses that topped Sullivan & Cromwell’s spring bonuses made the market come to a screeching halt.

You feel like the other top firms will have to match. But right now the ball is in the court of firms that are not used to being market leaders when it comes to associate compensation. These firms know they’ll have to pay top of the market compensation; they just don’t know what the top of the market is yet. Is it S&C’s bonus? Or is it Cravath’s? Nobody wants to end up like Skadden in 2008, which paid out much more in bonuses than its peer firms that year.

So right now all of these firms are kind of looking at each other, waiting for one of them to do something. According to a tipster, that’s what’s happening at Weil — they’re just desperately waiting for somebody to tell them what to do…

Here’s a text message we received, at (646) 820-TIPS, from someone who purports to know about Weil’s internal machinations:

Rumor at Weil is that Cravath’s beat of Sullivan has put the bonus in flux, they don’t know whether to match cravath or sullivan, so they wait for others to [m]ake that decision for them and set the market.

Really, Cravath’s decision was quite smart. They heavily beat the S&C spring bonus scale with respect to more-senior attorneys. Associates in Cravath’s class of 2006 are getting a $20,000 spring bonus, as opposed to just $12,500 for ’06 people at S&C.

But remember how small Cravath is (compared to a firm like S&C or Weil). Remember that Cravath’s partnership track is relatively short. Cravath just doesn’t have the number of senior attorneys that some of the other top firms have. Therefore, the cost to them of paying $20K to everyone in the class of ’06 and above is going to be a lot less than the cost to an S&C or a Weil, should those firms match Cravath’s scale.

And if S&C and others don’t match, then Cravath gets to claim it stands alone (at a relatively low total cost to itself).

That’s why behemoths like Weil or Skadden are trying to wait and see what happens next. Having to go back in and raise the associate bonuses is annoying enough to management. These firms really don’t want to match S&C, have S&C match Cravath, and then have to go through this all over again in terms of figuring out if they can match Cravath.

Not that I have a lot of sympathy for management at these firms. Don’t forget, if they hadn’t been so eager to lowball the associate bonus market back in November, they probably wouldn’t be in this position. Just because Cravath initially thought people would accept a recession bonus payment during a recovery didn’t make it true. These firms are now paying the price for their lack of vision.

But you can understand why Weil is skittish. They don’t want to be market leaders when it comes to associate compensation; they want to be market followers. Right now, it’s like Mommy (Cravath) and Daddy (Sullivan) are having a fight, and Weil’s the kid who just wants to know if he’s supposed to go to soccer practice or piano lessons.

So, stay tuned, bonus committees across the land. It’s a staring contest right now, but eventually somebody will blink.

Earlier: If Cadwalader Makes It Rain, Many More Firms Will Have to Follow
Associate Bonus Watch: Cravath Enters the Bonus Wars — and Beats S&C!


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