Biglaw, Bonuses, H. Rodgin Cohen, Money, Partner Issues

Sullivan & Cromwell Will Pay Spring Bonuses — But Will They Be Too Small To Be Worth Matching?

Today brings additional intelligence about spring bonuses at Sullivan & Cromwell (on the heels of yesterday’s report). This information has broad relevance within Biglaw because it’s clear that spring bonuses won’t happen on a large scale unless S&C moves. Four managing partners have already made clear to Am Law Daily that they won’t pay out unless they’re forced to do so. Any such forcing would presumably be done by S&C, which was the first mover behind last year’s spring bonus trend.

From the perspective of associates, there’s good news coming out of S&C, and there’s bad news. Which do you want to hear first?

We’ll start with the good news: Sullivan & Cromwell will be paying spring bonuses this year. This is what it strongly suggested in its 2011 year-end bonus memo, and this is what senior chairman H. Rodgin Cohen strongly hinted at when I asked him about it on Monday. In a lunch meeting yesterday with midlevel associates, firm chairman Joseph Shenker confirmed the news.

The meeting took place in New York, but other offices participated via teleconference. An S&C source reports:

Joe was asked directly over the T1 connection by someone in the LA office if we were getting spring bonuses. After giving the old saw about how spring ends in June, Joe said we’re getting bonuses, but the size has not been determined. However, they will be smaller than last year’s because of the uncertainty in the economy right now.

I would add that Joe didn’t seem pleased that someone asked and, after being fairly convivial during the session, turned to Rodge with a glare after answering the question and also asked someone to confirm that the question was from the LA office.

A few comments. First, it’s pretty funny that Shenker “glare[d]” at Rodge Cohen. Even though Cohen is now “senior chairman” as opposed to chairman, he’s still the biggest rainmaker at S&C, the god of financial institutions M&A. His bank mega-mergers play a huge role in filling the coffers at 125 Broad Street. This year might not be off to a great start for the M&A world, but Rodge Cohen is not someone to be glared at lightly.

Second, I think that “L.A. associate” should have passed himself off as a Palo Alto or D.C. attorney.

So the S&C spring bonuses will be smaller than last year’s generous amounts. How much smaller? We asked our tipster for input:

No idea as to size, but I recall that it in 2009, when the economy was just coming off the market lows of March, the firm paid a paltry bonus of like $500 for first years and couple grand for third years. I would think this will be higher, but maybe not by much.

Looking back at our report on the 2009 S&C spring bonuses, it seems that they started at $500 for first-year associates and topped out at $8,500 for the most-senior associates. That’s a far cry from last year’s scale, which started at $2,500 for first-year associates and maxed out at $20,000 for the most-senior associates.

For associates at firms other than S&C, small spring bonuses at S&C could spell big bad news. Spring bonuses are not a new thing at Sullivan; the firm paid them in 2008 and in 2009, not just in 2011. But, for the most part, other firms matched only in 2011, when S&C’s spring bonuses were sizable. As far as I can recall (please correct me if I’m wrong), spring bonuses did not spread much beyond S&C in 2008 and in 2009. So if S&C pays modest spring bonuses this year, then other firms might not feel compelled to match.

What should S&C do? I’d suggest that they be as generous as possible and pay sizable spring bonuses (and not just because we enjoy covering the subject here at Above the Law).

First, big spring bonuses will improve morale among existing Sullivan & Cromwell lawyers. Second, they will enhance the reputation and appeal of S&C among potential recruits.

Third, large payouts will increase the likelihood of other firms feeling obligated to match. And from the perspective of S&C as a firm, wouldn’t it want rival shops to incur these compensation costs as well? Wouldn’t it be in the interest of an elite and thriving firm like S&C to force other firms — perhaps financially weaker firms (cough cough, Dewey) — to pay up or suffer the reputational consequences?

Readers, what do you predict will happen?

Earlier: An Oracular Utterance from Sullivan & Cromwell on Spring Bonuses
Sullivan & Cromwell Spring Bonus – 2009
Associate Bonus Watch: Sullivan & Cromwell Pays Generous Spring Bonuses!

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