The conceit of this entire bonus season has been that the ridiculously low bonuses bar set by Cravath, Swaine & Moore was just an opening figure. People really didn’t expect that Cravath would halve bonuses. I mean, it’s CSM. They can count. Their profits went up. Why would they pay out 50% less than last year?
Well, I guess the answer “because they can” is going to have to be enough for Biglaw associates everywhere….
Let’s be clear about this: if bonuses hold at this point, Cravath will have effectively halved associate bonuses. Last year’s regular bonuses plus spring bonuses equal twice what this year’s bonuses were at CSM and other followers.
Have Cravath’s profits gone down by half? I doubt it. We don’t know for sure yet, but Am Law has started to dribble out its 2011 profitability numbers. So far, there haven’t been any Biglaw firms that show a drop in profits. There haven’t even been any firms that show stagnant profits.
Partner profits are going up, while associate bonuses are going down? Not even staying the same, the bonuses are going down? Are you kidding me?
It doesn’t make sense when you look at the profit numbers, but you have to remember how happy the partners are at keeping as much money as possible. Remember the Susan Webster story? Cravath partners are pretty much getting high-fived when they walk down the street. With that kind of positive reinforcement — we won’t call it collusion, just positive reinforcement — it’s no wonder Cravath can’t hear the groans from their associates and associates around Biglaw.
But here’s the thing: I still think people are going to get their money. First-year associates are a dime a dozen. But midlevels, midlevels who survived the layoffs and have the skills to do upper-level work at manageable prices, are in demand. There was a good story this week about how lateral hiring is hot right now.
A fifth-year or sixth-year associate at Cravath or Skadden or Sullivan & Cromwell is worth a lot on the open market right now. And there are firms — the Cahills and Irells, the Kirklands and the Boies Schillers — that are willing to pay top dollar for their scarce talents. You don’t have to give first years an extra dime; they are literally just happy to be there. But if you have talented midlevels, you better show them the money, or you are going to lose them.
And that’s not even counting banks or other companies looking for trained in-house talent. Biglaw thinned the herd of these people, and now the firms are going to have to pay top dollar to keep their survivors.
You’re going to get your money. My prediction: an extra $10,000 to $20,000 depending on class year, starting with third-year associates. It might be announced really late, end of February or early March, once firms realize they need to keep their talented midlevels.