Associate Bonus Watch 2010, Biglaw, Bonuses, Money

Associate Bonus Watch: Orrick Springs Forward

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What’s going on over at Orrick? Spring bonuses, that’s what — but with a twist.

As we’ve noted before, Orrick remains committed to merit-based compensation, even though some other firms that started moving away from lockstep have returned to it. Orrick’s approach to spring bonuses reflects the meritocratic orientation of its compensation.

Let’s have a look at what Orrick is doing here….

It’s worth noting at the outset that, at least for a while, it wasn’t clear that Orrick would be paying spring bonuses at all. About a month ago, we heard from some disgruntled Orrick associates who had resigned themselves to not getting springtime bounty. [FN1]

But as more and more firms stepped up to the plate over the past few weeks — in a trend welcomed by many debt-saddled associates, but criticized by one firm as reflecting “irrational exuberance” on the part of Biglaw [FN2] — it was no longer tenable for a major firm like Orrick to do nothing. Hence this week’s announcement.

The bonuses will be paid in mid-May to “eligible partner-track associates” in Orrick’s U.S. offices. Associates who received 2010 merit bonuses are eligible for consideration.

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The full memo — from Siobhan Handley, Orrick’s managing partner for talent — appears below. Here’s the key language:

As you would expect, we will pay Spring Bonuses in a manner that is consistent with the principles of our talent model, factoring in both work quality and hard work in determining each associate’s individual bonus. We will use what has come to be known as the “Cravath” Spring Bonus scale as our point of reference and will consider each associate’s overall contribution as reflected in your 2010 PDC performance evaluation and your number of productive client representation hours when determining individual bonus amounts.

While we continue to emphasize merit and performance in our approach to your development and advancement, the Executive Committee has determined that this unusual retrospective market adjustment warrants a greater emphasis on productivity. Accordingly, the firm will consider 1900 client representation hours in 2010 as the minimum standard for hard work sufficient to earn a Spring Bonus. With the Spring Bonus, every associate who received a Very Good performance review or better, and who meets our Spring Bonus productivity standard, will earn total compensation for 2010 that is equal to or better than what could have been earned at the vast majority of our peer firms.

This seems like a perfectly reasonable standard. The 1900-hour minimum is not particularly onerous, nor is the requirement of a “Very Good” review or better. If Orrick wants to maintain its commitment to merit-based compensation, it has to give the concept of “merit” some real teeth.

Of course, because Orrick is using the Cravath spring bonus scale as a benchmark, rather than following it slavishly, there is some opacity built into the Orrick spring bonus scheme. It will be interesting to see what kind of payments Orrick ends up making. If we hear from enough sources after the individual communication of bonus amounts, perhaps we’ll do an open thread.

In the meantime, congrats to Orrick associates on their spring bonuses. Your meritoriousness will be compensated!

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[FN1] One Orrick source who grumbled about spring bonuses also noted a number of partner departures since January. They include four litigators to Gibson Dunn in New York, two litigators to Bracewell & Giuliani in New York four litigators to Dechert in Los Angeles, two real estate partners to Pillsbury in New York, a capital-markets partner to King & Spalding in D.C., and a corporate partner to K&L Gates in Tokyo.

Of course, in fairness to Orrick, partner departures are just a fact of life in Biglaw. And over the past few months, Orrick has made some notable hires of its own.

[FN2] Might there be some merit to the claim of “irrational exuberance”? Could generous bonuses during boom times sow the seeds for layoffs during tough times? Would you rather be on a below-market base salary scale and enjoy greater job security, or enjoy a market-level salary but assume greater risk of being laid off? It’s food for thought.

Earlier: Prior ATL coverage of spring bonuses

ORRICK HERRINGTON & SUTCLIFFE — MEMORANDUM — SPRING BONUSES

FROM: Siobhan Handley
TO: US Associates

I am very pleased to announce that, in keeping with the firm’s commitment to providing competitive compensation, the Executive Committee has approved payment of Spring Bonuses for eligible partner-track associates in our US offices. Associates who received a 2010 merit bonus are eligible for consideration for a Spring Bonus.

As you would expect, we will pay Spring Bonuses in a manner that is consistent with the principles of our talent model, factoring in both work quality and hard work in determining each associate’s individual bonus. We will use what has come to be known as the “Cravath” Spring Bonus scale as our point of reference and will consider each associate’s overall contribution as reflected in your 2010 PDC performance evaluation and your number of productive client representation hours when determining individual bonus amounts.

While we continue to emphasize merit and performance in our approach to your development and advancement, the Executive Committee has determined that this unusual retrospective market adjustment warrants a greater emphasis on productivity. Accordingly, the firm will consider 1900 client representation hours in 2010 as the minimum standard for hard work sufficient to earn a Spring Bonus. With the Spring Bonus, every associate who received a Very Good performance review or better, and who meets our Spring Bonus productivity standard, will earn total compensation for 2010 that is equal to or better than what could have been earned at the vast majority of our peer firms.

Spring Bonuses will be prorated to address 2010 mid-year hires, leaves of absence and part-time schedules. Bonuses will be paid in mid-May and communicated to eligible associates individually.

On behalf of the partners, I would like to thank you for your ongoing efforts on behalf of our clients and your many contributions to the firm.

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