Associate Salaries, Biglaw, Bonuses, Money, Partner Issues, Partner Profits

Biglaw Firm Warns Associates They’ll Be ‘Disappointed’ With Comp

You know associates are pissed when they end their emails to Above the Law with lines like this one, from a message we received last night:

NO ONE SHOULD COME HERE. EVERYONE HERE SHOULD LEAVE.

Jacob Riis photographs associates at one Biglaw firm

That’s what happens when you tell your associates that they’re going to get paid significantly below market and like it.

Several firms have not yet announced spring bonuses, and associates at these firms are annoyed. But there are only a handful of Biglaw firms that cut associate salaries back during the recession and have not yet brought their people back to market-level base compensation.

One of the firms that is lagging behind the rest of the market had an “all associates” conference call yesterday, during which management tried to explain why associates were being underpaid and undervalued by the firm.

Let’s just say that not everyone felt like a winner

If you’ve never read about the law firm anthem of Nixon Peabody, or listened to the theme song itself, I urge you to stop and do so now (click here for the story or here for just the mp3). It puts everything else you’re about to read into context.

In just a few short years, Nixon Peabody has gone from a place where everyone’s a winner to a place where everyone is being paid below market. Even the “superstars” are getting paid less than what their class-year counterparts are getting at other large law firms.

It’s a sad state of affairs. The head of Nixon Peabody’s compensation committee recently tried to put it into context for disgruntled Nixon associates. A tipster gives us the backstory:

A lot of hilarious bulls**t spewed [yesterday] on a call hosted by John Snellings of the Nixon partnership. Just to bring you up to speed if you don’t remember, all associates took a 10% paycut in early 2009. There’s probably not more than a handful of associates who are back to where they were.

[On Tuesday] we had a call with the head of the compensation committee or whatever it’s called. It was basically the most demoralizing phone call of my life.

Here are some highlights and direct quotes, taken from the notes of two different associates who were on the call:

  • Snellings said: “Will many of you or some of you be disappointed? Absolutely. People have high expectations and we have to bring them down to reality.”
  • Raises this year will be between 0% and 5%.
  • Raises will not be paid out until June. Although the raises will be retroactive to March 1, tipsters report that Nixon’s fiscal year starts February 1, so there’s a month missing there.
  • Another quote: “We are going to try to pay our Superstar Associates as close to market as we can.” Translation: Nixon’s “superstars” are wildly underpaid.
  • There will be no spring bonus.
  • Nixon doesn’t even feel bad about that. Apparently spring bonuses are due to the “irrational exuberance” of other law firms.
  • But here’s why associates shouldn’t immediately leave Nixon for a market-paying job: “We make up for it with really interesting work, and better partnership prospects.” (Tipsters add: “He neglects to say that these are non-equity partnerships.”)

All in all, it sure does seem like one of the most depressing phone calls an associate can be a part of. Not only do Nixon associates have to walk around feeling like they are underpaid and under-appreciated, they actually have to sit there and listen to Nixon management justify why they don’t deserve to be paid on par with their peers.

But does Nixon have a point? Let’s not forget that at the end of last year Nixon management had a near mutiny on its hands, which resulted in a management shakeup. That’s a mutiny of partners, not associates. If associates walk, Nixon can replace them with other people who are even more desperate for any kind of paying work. If partners walk, because firm profits aren’t sufficiently high, well — Howrey Going To Nix Paying Everybody?

Of course, just because Nixon Peabody can find some associates willing to work “Biglaw” hours at below-market wages doesn’t mean that the current complement of Nixon employees have to be the chumps to take it. After this call, those who can leave probably will leave. Those who can’t will feel trapped. And those who come in to replace the departed will be those with nowhere else to go.

Yeah, we could be looking at the ghettoization of a Biglaw firm. But maybe this is only because NP management is taking an honest and prudent approach to running their business. If this is the most they can reasonably afford to pay people, then maybe this is for the best. And maybe we’re looking at the beginning of a process that will see talent fleeing for greener pastures.

If, on the other hand, Nixon Peabody management is being disingenuous and just trying to be as cheap as possible with “the help,” well, then they’ll reverse course just as soon as the talent drain becomes evident. If they can spend more money on associate compensation, they will spend more money just as soon as they realize they have to spend more money or risk losing all of their good people.

It’ll be interesting to see how this plays out, but we imagine Nixon won’t be playing this game alone. If you’ve got additional information about other firms playing the below-market salary game (shout out to our tipsters at Dickstein Shapiro), please send us an email. It’s always important to expose how the other half lives.

Earlier: Nixon Peabody: This Is Not a Love Theme Song
Nixon Peabody Management Shuffle

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