Associate Bonus Watch 2011, Biglaw, Billable Hours, Bonuses, Gay, Gay Marriage, Litigators, Money

Where My Boies At? Some Wonder About April Bonuses at Boies Schiller

Over the past few weeks, we’ve heard some surprising rumblings of discontent from Boies Schiller. Why do we say “surprising”? Because the complaints have been about compensation, which is typically something that BSF lawyers never complain about.

Boies Schiller, the litigation powerhouse founded by the legendary David Boies, is an amazing firm. Its lawyers work on some of the biggest and most important cases of our time, and their compensation reflects that. In addition to paying above-market base salaries — the BSF scale starts at $174,000 — the firm pays bonuses that blow the NYC market out of the water.

In recent years, Boies has made two bonus payments to associates, one in December and one in April. But this year, April came and went, and many lawyers did not receive any payout. Of those who did receive payments, many were surprised at the small size.

So what happened? Did the relative cheapness of the disappointing spring bonuses at Sullivan & Cromwell trickle down (or up) to Boies Schiller? Let’s discuss….

When we covered Boies bonuses back in December 2011, many lawyers were pleased, especially given how much higher the Boies bonuses were than those paid by Cravath (the traditional market leader, and David Boies’s former home). But not everyone was thrilled:

Cravath is so far in the rear-view mirror that Boies associates are comparing their bonuses this year to their bonuses last year, instead of comparing them to the paltry Cravath bonuses. Some Boies associates that we spoke to say that bonuses are down this year compared with last. As one tipster told us, “Many got less than last year, which granted was a huge year. Sentiment seems to be happy but not blown away.”

Should the somewhat muted reactions back in December have served as a warning sign for April? “Very few people received an April bonus,” a Boies tipster told us, “and there were a lot of disgruntled folks.”

It seems that the puzzlement and discontent made their way up to the big man himself, firm chairman David Boies. Near the end of April, he sent out a firm-wide email discussing the firm’s “formula compensation” policy. From his email (reprinted in full on the next page):

Every December lawyers are eligible for a bonus based to a large degree on their formula compensation calculation. Although no bills for December (and only certain bills for November) will have been prepared at that time, and although many bills for September and October will not yet have been paid, the Firm makes an effort to estimate what each lawyer’s cumulative formula compensation will be once all bills for the year are submitted and paid. That amount is then compared to the lawyer’s cumulative compensation previously paid and the difference, if any, after discretionary adjustments to reflect instances where a lawyer’s formula compensation appears significantly higher or lower than the lawyer’s productivity, is used as a guideline for the amount of the lawyer’s bonus.

One of our Boies tipsters highlighted the mention of “discretionary adjustments,” wondering if perhaps these adjustments contributed to the absent or lower-than-expected April payments. Said this source: “The ‘discretion’ component of the bonus was a surprise to everyone.”

Back to the Boies memo:

Occasionally the Firm will over-estimate a lawyer’s formula compensation, in which case an adjustment will be made the following December. More often (because the Firm makes an effort to err on the conservative side to minimize the instances where a lawyer carries forward a formula compensation deficit) the Firm will under-estimate what a lawyer’s formula compensation will be after all bills for the year are paid. In such cases where the under-estimation exceeds 10%, the Firm will ordinarily pay the lawyer a bonus in April (if the under-estimation is less than 10%, the under-estimation will ordinarily be taken into account the following December).

So perhaps it’s the case, then, that Boies bonuses in December 2012 will be better than usual (if under-estimation from the 2011 cycle gets reflected in the upcoming one).

We did some poking around. Here is what we’ve learned from our investigation.

First, the “discretionary adjustments” were not the driving force here. Rather, these adjustments are generally used to enhance associate compensation, to address cases where a lawyer provides excellent work, but the number of hours billed does not adequately reflect the value of the lawyer’s contributions (e.g., because of the associate’s efficiency).

Second, as we’ve noted before — see the update appended to this post — the “spring bonuses” at Boies are not true spring bonuses. Rather, they essentially represent a deferred portion or “true-up” of the year-end bonus from the prior year, based on work performed in that year (in this case, 2011). The firm tries to pay out as much of the year-end bonus in December, with April payments used only in cases where the firm significantly underestimated the associate’s bonus amount. So, to the extent that there are fewer or smaller April payments, it’s largely a function of the firm getting better at its estimation process.

Also, note this language from the Boies memo: “Although no bills for December (and only certain bills for November) will have been prepared at that time, and although many bills for September and October will not yet have been paid, the Firm makes an effort to estimate what each lawyer’s cumulative formula compensation will be once all bills for the year are submitted and paid.” This reflects the fact that the firm is estimating how much a given lawyer will work in November and December. If a lawyer works on a case that blows up in the last few weeks of the year, it’s more likely that the lawyer will receive an April true-up payment. On the other hand, if a lawyer has a fairly relaxed last two months, perhaps getting to enjoy the holidays or take a vacation, then that lawyer might not see an April true-up. It’s all about the relationship between actual versus estimated hours for that final part of the year.

Still, even with absent or smaller April payments, Boies Schiller associates are still doing way better than their peers at Cravath and Cravath followers, or even Sullivan & Cromwell (which at least is paying spring bonuses, unlike CSM). Remember, we’re talking about bonuses that average around $75,000 and go as high as $150,000 to $200,000, compared to the Cravath bonuses, which start at $7,500 and top out at $37,500. As BSF partner Alan Vickery once noted, “Young associates here can make a lot more than at Davis Polk.”

In other Boies Schiller news, the firm now offers the perk we’ve dubbed the gay gross-up, aka the “tax offset for domestic partner health benefits.” This shouldn’t surprise anyone, given that the firm is leading the fight for marriage equality by litigating the historic case of Perry v. Brown. They’ve been working on this cause for years, and now even President Obama is on board.

To those Boies Schiller associates who did receive extra cash in April, congratulations. You may have spent a lot of time in the office around the holidays, but at least you’re being richly rewarded for the extra effort.

(Don’t forget to check out David Boies’s full memo, which appears on the next page.)

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