Where Are The Biglaw Bonuses? And How Big Will They Be This Year?

Bonuses should be arriving soon -- perhaps as early as today -- and they should be as good as, or even better than, last year's.

Could today be the day that kicks off the 2015 Biglaw bonus season? Quite possibly.

Last year, you’ll recall, was an anomaly in terms of bonus timing. Simpson Thacher & Bartlett — stung by a series of high-profile partner departures, and eager to dispel the sense that it was becoming the “farm team” for Kirkland & Ellis — went out early, and went out big. STB announced bonuses before Thanksgiving, ahead of traditional market leader Cravath Swaine & Moore, and in generous amounts (although amounts that were later trumped by Davis Polk & Wardwell, which everyone else then matched).

Prior to 2014, though, bonus announcements followed a pattern: Cravath would announce first, then everyone else would follow. You have to go all the way back to 2008, when Skadden Arps announced big bonuses that everyone else ignored (in the midst of the financial crisis), to find a time when Cravath didn’t go first.

As for timing, Cravath — one of Biglaw’s most tradition-bound firms, as well as one of its most prestigious and most profitable — tends to stick to a schedule. As we’ve previously explained:

[In 2012], CSM announced on the afternoon of November 26, the last Monday in November. [In 2011], CSM announced on the afternoon of November 28, also the last Monday in November. The announcements tend to happen on Monday afternoon because Cravath partnership meetings, where the bonuses get approved, take place on Mondays at lunch. (That’s one of the nice things about being relatively small and having almost all of your partners in the same city; the entire partnership can actually meet regularly — and in one room.)

So is it the Cravath tradition to announce on the last Monday in November? Here’s a competing theory, floated in 2013:

Thanksgiving falls a bit later this year. So it’s certainly possible that Cravath figured it should wait until the Monday after the holiday, December 2, to announce. In 2012 and 2011, the firm announced on the Monday after Thanksgiving.

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What is today’s date? Today is November 30, 2015 — the last Monday in November, and the first Monday after Thanksgiving. It seems like there’s a good chance that Cravath will announce bonuses later today, unless presiding partner Allen Parker and his colleagues have some surprise in store for us.

Now, on to the more important question: how big will the bonuses be this year? Even bigger than last year, according to Law360:

BigLaw firms are gearing up to dole out hefty associate bonuses, likely surpassing last year’s impressive paydays in an attempt to retain top talent in an increasingly competitive associate market, experts say….

Experts say last year’s bonus race was certainly fierce — but this year, it will be even more intense. The market to recruit and retain associates is more competitive than ever, and as a result, firms will be fighting tooth and nail to keep them happy.

“Given that this is such a competitive environment, the firms that are the strongest — and the increasingly smaller group of leading firms — are going to continue to make every effort to put more distance between them and the rest of the pack,” said Jack Zaremski of Hanover Legal Personnel Services Inc.

In our Nationwide Pay Raise Watch feature, we’ve been covering all the compensation increases in markets outside New York. Even if those salary bumps haven’t been enough to drive New York to 190 in terms of base salaries, they could push NYC firms to pay out big bonuses:

[L]aw firms have started hiking up associates’ salaries outside of the major markets, with the overall national median first-year pay rising to $135,000 this year from $125,000 in 2014, according to the National Association for Law Placement.

With lower costs of living and opportunity for potentially better proportioned work-life balance, associates are starting to consider job opportunities in these new markets, like Seattle or suburban Philadelphia, on the same level as those in the major cities.

The influx of new opportunities, coupled with tight competition to recruit top grads from top law schools, has transformed the associate market, so providing more financial incentive to keep their associates in place is a top priority for BigLaw, experts say.

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So one can see why Biglaw firms would want to pay nice bonuses to associates — and counsels, don’t forget counsels — this year. Are firms in a financial position to do so?

Yes. As we noted earlier this month, based on a recent report from the Citi Private Bank Law Firm Group, law firm revenue grew by 3.6 percent in the first three quarters of 2015 compared to the same period in 2014 — which was already a great time for firms. And global M&A work, which drives the profits of bonus-setting firms like Cravath, Simpson, and Davis, is on track for a record in 2015. This is a prime time for M&A-centric firms to put even more distance between themselves and their competitors (some of whom, as you may recall, couldn’t quite match even last year’s bonuses, especially in their non-New York offices).

Here’s my prediction as to how all this will go down. Cravath will announce first — probably today, and if not today, no later than next Monday — and it will match last year’s generous Davis Polk scale. Cravath won’t want to take bonuses down from last year’s levels, and given the great year CSM has been having — look at all the multibillion-dollar M&A deals it’s handling — it certainly can afford to maintain high bonus levels.

(Cravath could take bonuses higher if it wanted to, but I’m guessing it won’t, at least not in the initial announcement. It’s the kind of prudent, well run firm that likes to prepare for a rainy day, and it takes a long-term view of bonuses as reflecting not just the year coming to an end but the year ahead. And as stock market turbulence in August and September showed, we could have a bumpy ride in store for us.)

After Cravath moves, a second firm — Simpson, Davis, Sullivan & Cromwell, or Skadden — will come along and raise bonuses slightly over the CSM scale — not for all class years, just for certain midlevel- or senior-associate classes, who generate the most profit for the firms (and who have the best exit opportunities). The true players will match that new, enhanced scale. The wannabe players will engage in various tricks — paying bonuses “up to” market levels (but not across the board), paying market bonuses but only in New York, paying market bonuses but only if you hit high hours (and maybe above-market bonuses for obscenely high hours) — to make it look like they’re keeping up with the Cravathians, even though they aren’t. And that will be a wrap.

What do you think will happen? Take our two reader polls below.

Before you do, a reminder: we love covering the Biglaw bonus season, but we need your help. As soon as your firm’s bonus memo comes out, please email it to us (subject line: “[Firm Name] Bonus”). We keep our sources on bonus stories anonymous, of course.

No need to send the memo using your firm email account; your personal email account is fine. But please be sure to include the memo as proof; we like to post complete bonus memos as a service to our readers. You can take a photo of the memo and attach as a picture if you are worried about metadata in a PDF or Word file. Thanks in advance for your help!

UPDATE (1:30 p.m.): “Here at Paul, Weiss, tomorrow is the last day to make our elections for how much of our forthcoming bonus to contribute to our 401K. It seems sh**ty to have us make that decision not actually knowing what our bonus will be….”

UPDATE (11:59 p.m.): We have closed the poll on timing (because November 30 has now passed without a bonus announcement), but we are leaving open the poll about the size of bonuses.

When will the first Biglaw bonus announcement arrive?

  • November 30, 2015 (i.e., today). (53%, 923 Votes)
  • Not today, but sometime in the week of November 30. (36%, 615 Votes)
  • The week of December 7. (9%, 149 Votes)
  • The week of December 14 or later. (3%, 44 Votes)

Total Voters: 1,731

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How big will 2015 Biglaw bonuses be?

View Results

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Law Firms Set To Make It Snow With Bigger Holiday Bonuses [Law360]

Earlier: Bonus Season Comes Early! (And It’s Not Cravath — It’s Simpson)
Associate Bonus Watch: Here Comes Skadden
Associate Bonus Watch: Davis Polk Beats Simpson!
Where Are The Biglaw Bonuses? (2013)


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