How would you describe your firm’s philosophy on bonuses?

We don’t believe that “one size fits all” bonuses really fit the way associates practice law. There are some associates who want to work really hard, and some who don’t.

While you’re in the middle of a trial, everybody works flat out. When you’re out of trial, how much work you do depends on how much responsibility you take on. Different associates will want to work at different levels. We’ve always believed that it’s better for both associates who work very hard and those who don’t work so hard to have bonuses that reflect their productivity.

Bonuses that reflect productivity are a lot fairer for associates who work very hard. But even for those associates who don’t want to work so hard in a particular one- or two-year period, you want them to feel comfortable with a lesser workload. You don’t want to have a situation where two people sit side by side, one works 1800 hours and one works 2800 hours, and both get the same bonus. It’s not fair to the one who worked 2800, but it also puts the 1800-hour associate under pressure to work more.

And why does Boies Schiller structure bonuses in this way?

First, think of the kind of associates we have. They’re at the very top of the profession. They could go anyplace, and they choose to come to BSF. Once they get here, they end up taking on a lot more responsibility earlier than they do at most firms, in part because of our relatively limited leverage. They work really hard for the most part, especially over the past few years. If you have top associates, required to take on huge amounts of responsibility, who are working very hard, you want to reward that productivity.

That’s from the standpoint of fairness. But this works from a self-interested perspective as well. As a firm, if you want to recruit and retain the best people, you need to reward their productivity.

We are not an eleemosynary institution. Bonuses also reflect what’s in our self-interest.

Second, even though they have hundreds of millions or even billions in revenue, law firms don’t have stockholders; they are “owned” by the lawyers who are there. There’s a sense among some firms that the owners of the firm are the partners. For us — because we started very small, with the partner/associate distinction having more to do with age — we’ve always viewed our associates as important stakeholders in the institution.

Not everyone who comes here will make partner, but a much higher percentage of our associates do become partners. That’s partly because we’re very selective, partly because we have lower leverage, and partly because we are growing. The people we bring in are people who will be here for long stretches of their careers. We want to integrate them into the firm and make them feel that it’s their firm.

But it’s not all about the monetary rewards….

No one works as hard as our associates do just for the money. You have to have a level of commitment because you believe in, and identify with, the institution.

This has to be a two-way street. You’ll recall that three or four years ago, in 2008 and 2009, when none of the law firms were doing well in the financial crisis, many firms cut back on associate bonuses — and associate employment — in order to preserve partner compensation. We trimmed partner compensation in order to preserve associate compensation and employment. We did not lay off anybody. We continued our bonus payments. We believed that the partners — in part because of how much more money they made, in part because they’re older — were in a better position to absorb what we believed to be a temporary economic setback. And it has been just temporary; we’re doing better than ever.

So how is 2012, which is drawing to a close, looking for Boies Schiller?

This is the best year the firm has ever had.

Wow. Boies has had some major cases over the years. Why has this year been so great?

The financial markets have, to a significant extent come back, so there’s been more business from that. At the same time, you have residual legal conflicts that arose out of the crash. You have those two things combining, like rivers coming together, to generate a real demand for high-quality legal services.

In 2005, 2006, and 2007, we had a lot of great core clients — DuPont, AmEx, Altria — large clients that gave us a lot of work. But we were not actively representing large financial institutions. We did a fair amount for Goldman Sachs, but that was an historical client and not a commercial bank. Now, through a variety of reasons, we do major work for Barclays, BNY Mellon, HSBC, Deutsche Bank — that whole financial services practice has added another dimension, and another set of demands, to the firm.

Do you predict that more firms will move in the direction of individualized compensation?

I’ve been thinking this would be a trend for 15 years now! Sometimes when you think something is just around the corner, and it isn’t, and it isn’t, you have to rethink your predictive skills.

I still rationally think that firms, particularly those at the top, need to have individualized bonuses. You want to attract associates with different outlooks on work. You don’t want to attract only 2200-to-2400-hours people; you want to attract some who work more, and some who work less. I think flexibility advantages firms over the long run, and productivity-based bonuses help implement that flexibility.

Boies Schiller is flourishing. But so are firms like Cravath and Wachtell that pay their associates in lockstep. What do you think explains their continued success?

A couple of things. One reason is that almost all of them are using lockstep systems. If you began to see a substantial number of firms moving to individualized bonuses, it would be harder for Cravath and Wachtell to sustain.

Second, firms like Cravath and Wachtell have tremendous traditions, and tremendous strength within the firm and in their client relationships. These firms have the capacity to make decisions that may not be the most efficient and they’ll not only survive, but prosper.

Third, there are so many reasons to go to a firm like Cravath or Wachtell that they will continue to get a lot of great associates based on those reasons — even if a number of potential associate candidates would prefer individualized bonuses.

I understand that you share my affection for the game of craps; you’re a risk taker. Many talented law students are not. They might worry that they’ll come to the firm and something bad will happen to them — they won’t get to work with the right partners, they won’t have enough to do.

How would you pitch the Boies compensation system to a smart but cautious law student? Or is a risk-averse kid not the kind of person you’d want at Boies Schiller?

Three things. First, if you look at our minimum bonuses, there are relatively few associates who end up getting less than the bonus they would have gotten at a lockstep firm.

Second, talk to our associates. They will tell you that if you want to work, there is more than enough work to do. There’s no chance you’ll get stuck working for a partner who doesn’t have a lot of good work; it just doesn’t reflect the reality of how busy we are.

Third, I happen to think our law firm is an ideal place for somebody who is risk-averse. I’m not sure I’d want to populate the firm primarily with risk-averse people, but from a personal standpoint, a risk-averse person who is a good lawyer would find a lot attractive about our firm.

The greatest risk for an entering associate is what’s going to happen to you six, seven, or eight years later. It’s not like when I started practicing in the 1960s, when you could go to a very large firm and if you didn’t make partner, there were all sorts of other attractive opportunities. Today the exit opportunities are not as good or as plentiful as they used to be.

So a risk-averse law school graduate or someone leaving a clerkship wants to know: if I go to a firm, where am I likely to be six to eight years from now? In part because of our lower leverage, in part because of our growth, and in part because of our firm philosophy, it is more likely that you will be in a place you want to be in six to eight years later, compared to a firm that hires a very large number of associates and makes a small fraction of partners.

How a firm develops, and what a firm’s philosophy is towards its lawyers, can tell you a lot about how the firm is going to be with its clients. When [Jonathan] Schiller and I started out, we were both in our fifties, had seen a lot, and had put some money away. We could afford to develop a firm that reflected our vision for the practice of law, as opposed to a firm that would just serve our personal economic interests.

One final, somewhat off-topic question: any predictions on what the Supreme Court will do in Hollingsworth v. Perry? [Ed. note: A petition for certiorari is pending in the case.]

I have no predictions about what they’ll do, but I have some hopes. Here are some possibilities.

They could deny cert, which would be great, because then our clients and millions of others could get married.

They could grant cert, which would be fine, because then we’d have a merits argument in the next few months.

Or they could continue to not decide whether to hear the case, maybe hearing one of the DOMA cases first, and put our case off to the next Term. That would be a terribly unfair result.

But could that perhaps be a good thing, if they issue an opinion in the DOMA cases that would be favorable precedent for you, and then turn to your case?

Think of our clients. They’re in limbo; they can’t get married. We won this case at the trial level two and a half years ago. We have been sitting here with an amendment to the California state constitution that prohibits marriage equality that was declared unconstitutional by a federal court. That decision was affirmed by the court of appeals. Yet that discrimination is still enforced. It’s really time to have this decided.

Obviously that [getting a favorable DOMA precedent and then winning in Hollingsworth] would be preferable to the alternative. But it would still mean putting off for a long time something that people ought to have the right to do now. It’s one thing to look at these issues in the broad scope of history and another from the standpoint of individual couples,and parents, whose own lives are passing on, and whose children are growing up with their parents unable to be married.

One thing experts on both sides agreed on at trial is that the inability of gay and lesbian couples to marry seriously harms them and the children they are raising. Millions of children are being raised by gay and lesbian couples. The damage that is being done to these people by delay is something that it’s hard to sit back and get comfortable with, even though you can look at arc of history and know that eventually it will happen.

Thank you for all of your work on behalf of marriage equality, and thank you for taking the time to speak with us today!

Rhode Island Judge Has Stake in Pension Case Outcome [New York Times]
Bonus Watch (Envy Edition): Boies Schiller Tops Out At $250,000 [WSJ Law Blog (sub. req.)]
Boies Schiller Pays Big-Bucks Bonuses to Top Associates [ABA Journal]

Earlier: Associate Bonus Watch (2011): Boies Schiller Shellacks Cravath
Associate Bonus Watch (2010): Boies Schiller Sets the Bonus Bar
Associate Bonus Watch (2009): Boies Will Be Boies


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