Associate Bonus Watch 2010, Biglaw, Bonuses, Mergers and Acquisitions, Money

Associate Bonus Watch: What Did Wachtell Do?

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The law firm of Wachtell Lipton is not the nation’s coolest firm, having been knocked out by Davis Polk in Above the Law March Madness. But the bonuses paid out by WLRK in 2010 were still plenty hot — about as sizzling as some DPW associates, one might say.

Should they have been even better, though? Not everyone at 51 West 52nd Street was thrilled about the 2010 payouts (even though Wachtell associate bonuses still exceed those at almost every other firm).

Let’s take a look at what WLRK doled out last year….

The Wachtell Lipton bonuses were actually announced and paid back in 2010. Alas, getting information about the notoriously secretive firm isn’t easy, even for a former employee like myself. A la Fight Club, the first rule of Wachtell is: you do not talk about Wachtell.

Lawyers at the firm are very discreet — and paid well for their discretion (happy and well-compensated associates are less likely to complain). And this year there was an additional reason for employees to remain tight-lipped. We won’t go into it, so as not to give other firms ideas; but if you currently work at WLRK, you know what we’re talking about.

In terms of how Wachtell bonuses generally work, here’s our prior explanation:

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First, they’re lockstep, not tied to any billable-hours requirement or performance review. Everyone in the same class receives the same bonus.

Second, Wachtell bonuses are calculated as a percentage of base salary. Sometimes the percentage is the same from class to class; sometimes it’s not.

In the past few years, there have been divergences in the bonus percentage from class to class.

What happened in 2010? Sources report that the 2010 bonuses were “substantially similar” to the 2009 bonuses. In case you don’t recall, the 2009 bonuses started at 45 percent of base salary and went up from there. For first-year associates in 2009, that yielded “all in” compensation of around $240,000: an above-market base salary of $165,000, plus a $75,000 bonus (a bonus representing 45 percent of base salary). For more-senior classes, we hear the bonus percentage went as high as 70 percent.

So, in 2010, a class of 2009 associate at Wachtell Lipton — i.e., a non-stub-year, first-year associate — probably made around $240,000. That compares quite favorably to the $175,000 in “2010 attributable” compensation this lawyer would have earned at Cravath or a firm on the Cravath scale ($160K base for all of 2010 + $7500 year-end 2010 bonus + $7500 spring 2011 bonus).

UPDATE / CORRECTION: We’re now hearing that Wachtell associate bonuses in 2010 were slightly lower than bonuses in 2009. The apparent objective of WLRK’s 2010 bonus scheme was to make sure that a given associate received roughly the same in total compensation in 2010 as in 2009. Because associate base salaries went up at the start of 2010, due to the traditional seniority-based raises, year-end bonuses went down (to bring individual associates to the same total comp level in 2010 that they were at in 2009, as more-junior lawyers).

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How was this bonus news received by Wachtell associates? According to one source, it was greeted with some “grumbling” back in December, given the firm’s strong year, as well as improvement in the general economy. In 2010, the firm worked on over $110 billion worth of M&A deals (the main driver of Wachtell’s profitability), including the year’s second-largest domestic M&A transaction (Qwest’s $22.4 billion sale of a 61 percent stake to CenturyTel Inc.; Wachtell represented CenturyTel).

In more recent weeks, as other top firms have announced spring bonuses, some Wachtell associates have started wondering whether they might be receiving some kind of mid-year bounty (which has happened a few times in the past 15 years or so — e.g., summer bonuses in 1998 and supplemental bonuses in September 2006). But word on the street is that WLRK has no current plans of 2011 spring or summer bonuses; if you want to see the extra cash, you need to stick around until the end of the year.

Will the Wachtell 2011 bonuses be worth the wait? My guess is yes. So far the firm is off to an excellent start. It’s representing Deutsche Telekom, owner of T-Mobile USA, in the massive $39 billion AT&T deal, which should yield some nice fees. Things have also been going well on the litigation side, with Wachtell scoring an “Airgasmic” victory for its client, Airgas Inc. (which successfully fended off a hostile bid from Air Products, represented by Cravath).

If you can provide us with more detailed information about Wachtell bonuses — ideally we’d want to know class year, base salary, and bonus — please email us, subject line “WLRK bonuses,” or text us (646-820-8477 / 646-820-TIPS). Thanks.

Disclosure: I worked at Wachtell from 2000 to 2003. You can read about what I thought of the experience over here (last few paragraphs).

Yes, Dear, Your Legal Brief Was ‘Airgasmic’ [WSJ Law Blog]
Corporate Scorecard 2011 [American Lawyer]
S&C, Wachtell Lead on AT&T’s $39 Billion T-Mobile USA Acquisition [Am Law Daily]

Earlier: Associate Bonus Watch 2009: Wachtell Lipton Bonuses Go Down Again
Associate Bonus Watch 2006: Wachtell Lipton Windfalls
Skaddenfreude: Wachtell Lipton’s ‘Midyear Bonuses’

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