Associate Bonus Watch: WilmerHale's Wily Ways?

Is "merit-based" compensation just a poorly disguised way for a law firm to lower total compensation costs?

Last week, WilmerHale notified its associates of their individualized bonuses under the firm’s merit-based compensation system. Overall, people seem… okay. This source accurately summarizes the sentiment: “Some people are angry, some people are fine.”

A minority of our sources seem fine — happy, even. We heard from class of 2009 and class of 2011 associates who got Davis Polk bonuses for hitting the magic number of 2000 hours and described themselves as “quite thrilled.”

But other sources, including ones who received even more than the DPW scale, believe that WilmerHale’s merit-based comp is “a thinly veiled cost-saving measure” (as one person put it last year). Here is what one tipster told us:

FYI, WilmerHale is pulling some serious bonus shenanigans right now. Very curious to see the tortured logic they will use to say they “beat market” (in 60% of cases by a tiny amount, while missing market in 30% by a huge amount).

The math is pretty straightforward — the overall bonus pool is significantly lower than market firms. [T]he scheme is simple: pay underachievers way below, overachievers a tiny bit above.

Said a second source (who received a barely above-market bonus for racking up tons of extra hours):

Wilmer announced bonuses. The way they do them is that they give “strong performers” (which includes people who had average evaluations but billed over 2200 hours) very slightly above market. Then they give “weak performers” (which includes people who billed under 2000 hours) WAY under market.

This way they can announce that 47% of associates [getting bonuses] received above market compensation (and 32% market and 21% under). But if you look at 100 midlevels and do the math, it’s clear that this is all about cost savings. By paying 32 people the same, 47 people who would have gotten 65k at market an extra 5k, and 21 people who would have gotten 65k 37,500 LESS, the firm pays out $552k less in compensation for those 100 people.

This is actually probably overly generous, because apparently 12% of people didn’t get bonuses, but let’s say that happens everywhere. The basic point is that the penalty for underperforming is far greater than the bonus for overperforming, to the point where even a small number of underperformers (much lower than the actual figure of 21%) means the firm saves money.

And this tipster further speculates that the percentages may understate the cost savings to the firm, if the market and above-market bonuses are going disproportionately to junior attorneys, who are cheaper. In addition, under WH’s merit-based compensation system, base salaries are lower than market throughout the year; this money comes back to hardworking or highly rated associates at the end of the year in bonus money, but it amounts to “an interest-free loan to the firm (and they don’t give any of it back if you leave in first half of year).”

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We mentioned to this source that we heard from a handful of WilmerHale associates who seemed happy with their comp. The source was not impressed:

The fact that some people are happy just suggests that the firm’s strategy is sadly working. Bottom line is that the overall comp pool is well below market, and they have found a way to obfuscate that fact that makes it look like, ‘Hey, some people won and some people lost — that’s what happens with merit based comp.’ But some people won very small and others lost big — that’s the bottom line. And more senior associates lost more often. There’s no reason they couldn’t have had overachievers get paid significantly more given the stated purpose of merit-based comp.

The lower base salaries connected with merit-based compensation also create another problem, pointed out to us by a different WilmerHale tipster:

One issue that is becoming more apparent about the merit-based comp system is that women who take paid maternity leave are getting screwed (relative to those at other firms). The reason is that it is hard to accumulate enough hours to qualify for even a pro-rated bonus (because pregnant women tend to use vacation time). I imagine this is true most places, but remember, for example, that a fifth-year at WH gets $210k base instead of $230k base. So failure to get a bonus costs a WH woman $20k. Also, they said that 12% of attorneys got no bonus — I am curious how many were women who took leave.

Maternity leave people seem sort of resigned, like everyone knows you don’t get bonus if you take it. Like I said, that is fine, but vis a vis other firms we get less because of the lower base.

Are gripes about Biglaw bonuses or compensation, in the grand scheme of things, major problems? Of course not. The title of BloombergBusinessweek’s pick-up of one of our recent bonus stories says it all: “Rich Lawyers ‘Livid’ Because New York Lawyers Are Slightly Richer.”

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To look at the situation another way, though, lawyers as a group are deeply committed to justice. So even a little shortchanging, to the tune of a few grand, can mean a lot, if it violates the principles of fair and equitable treatment.

UPDATE (1/27/2015, 10:45 a.m.): Here’s what one content WilmerHale associate had to say about the complaints: “The bottom line is that if you made your hours and did good work, you got DPW bonuses. I guess the folks with not a lot of work to do had the free time to elucidate the inadequacies of the bonuses. I think the bonuses were fine.”

Rich Lawyers ‘Livid’ Because New York Lawyers Are Slightly Richer [BloombergBusinessweek]

Earlier: Associate Bonus Watch: Happy Campers At WilmerHale?
Associate Bonus Watch: Firm Angers Associates With Low Bonuses (Outside New York)


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