Last year, I complained that the complicated compensation system at Vinson & Elkins was giving me a headache. What’s wrong with a Cravath-style system of lockstep salaries and bonuses? Or a Kirkland- or Latham-style system of lockstep salaries and individualized bonuses? Is it really necessary, for purposes of paying associates, to utilize a system involving deferred compensation?
Luckily for me and my limited quantitative-reasoning ability, V&E has decided to streamline their system. Let’s learn about what they’re doing, which they revealed in the course of announcing their bonuses.
Due to the complex and conflicting reports we were receiving from our sources, we decided to reach out to the firm for comment. A Vinson & Elkins spokesperson kindly issued a statement (reprinted in full on the next page). Here’s how it begins:
On Wednesday, Vinson & Elkins announced bonus ranges for 2012 and announced that it has made several changes to its base compensation structure in the DC and Texas offices for 2013.
In DC, the Firm will no longer defer a portion of base pay and associates will be paid at the national pay scale starting January 1, 2013.
In case you need to refresh your recollection about the national pay scale, look back at our story of January 22, 2007, Breaking: Simpson Thacher Raises Associate Base Salaries!!! Almost six years later, the “Simpson scale” remains the standard for Biglaw.
In Texas, we are making a number of changes to base compensation in an effort to phase-out the deferred compensation structure over the next few years. In general, those associates in the classes of 2010 and more senior who have earned the deferred portion of their salary in 2012 will no longer be subject to the deferred compensation system. The same is true of associates in the classes of 2011 and 2012, and future associate hires. For associates in the salary classes of 2005 and 2006 (and higher), the base salary in Texas has been increased to $265,000 and $280,000, respectively, matching national scale.
This is the news we heard from sources that caused us to lob in an inquiry to the firm. If you made your hours in 2012, you get to escape the land of deferred comp.
In terms of bonuses, last year, the Firm paid bonuses in the range of $5,000 to $45,000. This year, V&E will increase the range to $5,000 to $60,000. As in the past, we do not have a lockstep bonus system. Instead, individual bonus amounts will be based primarily on productivity including client hours, firm credit and pro bono hours and upon achievement of exemplary annual reviews. As in prior years, 2012 bonus amounts will be distributed on January 31, 2013.
Attracting and retaining the best associate talent has always been a priority for V&E, and we believe that these changes to our compensation structure will continue to allow us to remain competitive in our respective markets.
The news was communicated to associates by voicemail (no memo). The 2012 bonuses will be paid on January 31, 2013. Here are some reactions from associates:
“Getting rid of our bizarre deferred comp structure where you had to hit 2000 hours to be trued up to NYC market base.”
“Associates in Houston are very cheerful…. Bonuses will be slightly higher than CSM in some classes [for high billers] — not by a huge number, but slightly ahead, and remember no state income tax in TX.”
And the cost of living is quite reasonable in the Lone Star State, as we’ve mentioned again and again in these pages. In Texas, on a mere associate’s salary, you can get the modern equivalent of 40 acres and a mule: 3500 square feet and a Lexus. No wonder Dallas and Houston are both in the top 10 of the best cities for young attorneys.
All in all, the changes being made by Vinson & Elkins sound like very good news: they will simplify the system and put more money in people’s pockets. Maybe V&E can help our friends in D.C. with tax reform?
(Flip to the next page to see the complete Vinson & Elkins statement to Above the Law.)