Back in 2007, Simpson Thacher led the charge to $160,000. Not Cravath, not Skadden, not Sullivan & Cromwell — it was STB that was first out of the gate with associate salary raises. Simpson Thacher is one of the most respected law firms in the country, and it used to be a compensation leader.
But those days appear to be long gone. Now, the firm is just a follower. Its theories about associate compensation seem to have nothing to do with the health of the firm, and everything to do with doing whatever Cravath tells it to do.
Associates are the firm seem quite disappointed by that….
The STB bonuses are in, and as one source succinctly put it, “Simpson matched Cravath, blah blah blah.” You can read the full memo on the next page.
It’s the standard thing this year. What’s far more interesting is the reaction from individual Simpson Thacher associates:
Not much of a surprise given what Cravath did, but still extremely disappointing. We have been hearing how busy everyone is and that the numbers are tracking to one of the most profitable years ever and simply matching last years scale is very disappointing.
From another tipster:
From everything I’ve heard, this was Simpson’s most profitable year ever, so most people I’ve spoken with find these bonuses very disappointing. We were hoping (and perhaps still falsely hoping) that S&C would come over the top because I know some partners felt that, given the year we had, associates deserved higher bonuses, but they just needed another firm to break the ground since we apparently weren’t willing to do it.
Look, we know that bonuses aren’t about “desert.” Partners do not care about what associates deserve. We also know that post-recession bonuses have almost nothing to do with the “health of the firm,” perceived or otherwise. That STB is busy and profitable is great news for Simpson Thacher partners, but associates are fooling themselves if they think firm profitability will be reflected in their bonuses. The “new normal” means that partners pocket the profits when things are going well, and fire people when things are going poorly.
Bonuses aren’t a reflection of effort or contributions to success, they’re a reflection of the bare minimum partners think they can get away with given the market.
But who sets the market? Currently, Cravath sets it, and it is done. But Simpson used to be in that conversation. Remember, there was a time when firms competed on associate compensation. You’ve heard of “competition,” right? It’s how capitalism is supposed to work. Even if STB set a figure that all other firms would eventually match, doing so would still put pressure on lower-performing firms that don’t have Simpson’s profit margins. Setting a high bonus when your financials allow you to is a way to hurt your competition.
But Simpson isn’t interested in competing, not anymore. It — and so many former market movers like it — is interested in colluding. And that is sad. Partners at these firms are fiercely competitive when it comes to client business. They’re competitive over their own profits per partner. If one partner buys a new boat for his wife, another brings his new wife on his new boat.
But when it comes to labor, suddenly competition seems pointless and self-defeating. Why bully less profitable firms with an aggressive bonus scale? Why challenge, say, DLA Piper to pay associates working out of their Grand Central Terminal office a rate that would make it hard for partners there to maintain lofty PPP? Why stand out when you can make so much money just following along?
When I get a big stack at the poker table, I turn into a bully. I don’t let people stay in hands and catch cards. Instead of sitting back and counting my chips, I use them to get weaker competitors out of the game. Firms that are profitable in this market could be using that money to really stick it to firms that haven’t adapted as well. Instead everybody just waits for Cravath to set a comfortable bar everybody can hurdle.
Simpson used to be a challenger, now it’s just a follower. I’m sure there are a lot of partners at places much less profitable than STB who are thankful for the firm’s generosity.