Associate Bonus Watch 2010, Biglaw, Bonuses, Layoffs, Money, Pregnancy / Paternity

Growing Discontent at Kaye Scholer

We previously compared the law firm of Kaye Scholer to a drag queen. Kaye Scholer, Kay Scholer — geddit?

Well, some associates at Kaye Scholer claim they’ve seen underneath all the make-up — and it’s not pretty. This contestant would not go far in RuPaul’s Drag Race.

In terms of responses to our recent discussion of which firms aren’t paying spring bonuses, however, Kaye Scholer emerges a winner. We’ve heard from KS associates in droves over the past day or two — and the depth of their fury is impressive.

What are they so upset about? It’s not just the lack of spring bonuses. Let’s find out….

Here’s what one tipster said:

I’m sure you’re getting emails on the debacle at Kaye Scholer, so I won’t go into the details. I don’t mean to tell you guys how to do your job, but if you run a piece can you please go with the headline: “Kaye Scholer to Associates: Drop Dead”. Truer words couldn’t be spoken. Thanks.

This source didn’t get into details, but another reader did:

When spring bonuses first started happen[ing], management announced to a small associates committee that there would be no spring bonuses. They said they wouldn’t pay them since the firm already paid spring bonuses, reasoning that a few people were paid above market for 2010. This was of course nonsense, since a tiny number of associates received above market bonuses (under 10%), and it had absolutely nothing to do with spring bonuses.

Realizing the ridiculousness of this, management changed its story about a month ago. It announced to the same committee that it would not be paying spring bonuses because its firm policy to make compensation decisions at the end of the year and it will not consider paying an extra bonus now. Instead, it will take in account the entire market at the end of the year, including spring bonuses.

This was reiterated at a firm-wide meeting held earlier this week:

[On Monday] we had a firm-wide meeting, and this was announced to the whole firm. [Co-managing partner] Mike Solow argued that the firm will not be bullied into changing its compensation policy and therefore will not even consider paying spring bonuses, but that they will consider them at the end of the year.

A second source corroborated:

Kaye Scholer definitively told associates [on Monday] that they were not getting spring bonuses. Did so in a teleconference with the whole firm. Statement by the managing partner contained the following corkscrew logic (this is a direct quote): “We’re not going to let other firms dictate when and how we compensate our associates. We’re going to wait until the end of the year and see what other firms have done. Then we’ll make our own decisions.”

Bottom line is that they gave a vague promise to make associates whole at the end of the year, which could include the amount associates weren’t paid in spring bonus added on top of market year end bonuses. Of course, in the wording they chose, they left themselves plenty of room to wiggle out from that too. We’ll just have to take their word on it that they’ll do the right thing. Of course, after the way things were run here in 2008-2010, the partners’ word is meaningless.

Making it up on the back end could be a reasonable approach, but one KS source doubts that will happen:

No one buys this complete crock of s**t. No one expects the firm to pay bonuses equal to year end market + spring bonuses at the end of year (or in February 2012, since they pay bonuses late). Rather, they are setting themselves up to feed us another pile of s**t. Most likely they will pay market to those who meet the hours requirement (1950) and then give extra bonuses (equal to spring bonuses) to those who bill 2400 for the year.

They think if they do this that they can claim they pay market and no one will see through their bullshit. Oh yeah, and we are probably going to move to a “competency-based” pay scale at the end of the year.

Ah yes, a merit-based pay system — complicated to implement, and generally not popular with associates.

We’ve noted in these pages that it can be dangerous for a firm to pay on the Cravath scale if it isn’t doing well enough. But one Kaye Scholer associate views the firm’s financial state as capable of sustaining spring bonuses:

This is after we had a record breaking year in 2010 in terms of efficiency — revenue per lawyer broke a million for the first time ever. And they also announced [in the meeting] that business is picking up even more. Yet, they are too cheap to share the wealth.

Everyone is thinking about leaving. Please call Kaye Scholer out as the TTT it is. We are the largest, most profitable firm based in NYC that is not paying spring bonuses. A true piece of s**t.

According to yet another irate Kaye Scholer associate, this is just the latest insult:

No one could logically decide to work here if they had any other options. I heard several associates state that they would tell interviewees that very same thing this fall. Of course, won’t be hard to convince them to stay away given that, at the time they’ll be interviewing in the fall, associates at KS will be paid about $20k less on average than at other firms in New York. Even dumps like Schulte. Guess we can always tell recruits that the partners promised we’d make market again someday.

Terrible things have happened here in the last few years. The word needs to get out: STAY AWAY. Rampant stealth layoffs, associates fired based on fictional reviews (by partners they never worked for or for work they never did), partners calling other firms to sabotage associate job prospects after the associates were fired, women fired for getting pregnant, cutting first year salaries by $100k without notice, shifting minimum billable hours requirement to 2200 without notice, mandatory salary hold-backs based on shifting hours standards.

And, my personal favorite, announcing bonuses at a firm wide meeting and then sending a partner to personally speak with those who qualified for bonuses to let them know that the amounts stated at the meeting were fictional and “real” bonuses would be half of what was announced. Yup, that really happened.

Wow. Tell us how you really feel!

Are these Kaye Scholer associates justified in their anger? Or are they overreacting?

We’ll play devil’s advocate (because, as noted earlier today, we like to air both sides of a debate). As we’ve suggested before — see, e.g., here and here — not every firm can or should be on the Cravath scale. Perhaps associates at some firms should just be happy that, as we noted in our recent DLA Piper discussion, they are “still making a heck of a lot more than the average American J.D. holder.”

We’re just tossing these thoughts out there, to spark a discussion. Where is the cutoff — in terms of profits per partner, prestige, or some other metric — above which a firm really ought to be paying spring bonuses?

UPDATE: Here is one comment that has received a high number of “likes”:

The question is whether you want to be a player going forward or not. If the partners prefer second or third tier recruits, dissatisfied and unproductive associates, and the inevitable decline in profitability simply to pad their personal draw by $20k or so for a few years, then so be it. Won’t be the first time a bunch of baby boomers have reacted indignantly to being accurately labeled as short-sighted and self-indulgent.

The morale point, about “dissatisfied and unproductive associates,” seems valid. But on the question of recruiting, one might reasonably ask: Would paying on the Cravath scale improve the quality of Kaye Scholer’s hires? Or would the firm just end up with more or less the same recruits, except at a higher price point?

Earlier: Which Firms Are Definitely NOT Paying Spring Bonuses?
Associate Bonus Watch: Kaye Scholer Rewards High Billers

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