NY To $190K: Who Will Lead The Charge?
A Biglaw pay raise will happen (someday); when it does, who will be the first mover?
Which top law firm will make it rain for associates?
The halls are alive… with the sound of money. As we recently mentioned, there’s increasingly common talk about a new and improved salary scale for Biglaw associates.
Earlier this month, we shared with you five arguments in favor of a Biglaw pay hike (not that you needed convincing — at least the associates among you). In today’s story, the latest installment in our “NY to 190” series, we’ll offer some thoughts — and seek yours as well — on which top law firm will take the market higher.
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As regular Above the Law readers know, there already are a fair number of firms that pay above-market base salaries — the members of what we like to call the $160K Plus Club. But these firms tend to be (1) small and (2) very demanding in their hiring standards (yes, even more demanding than most Biglaw firms, which are already highly selective). If the broader Biglaw market is going to go a higher pay level, the charge will have to be led by a large firm, one with hundreds of associates, that most other major firms see (or aspire to see) as a peer.
For my money, the market mover will be a member of the Fab Five. As I wrote last year, while we waited for bonus news to break:
There are, at most, five firms with any role to play in setting compensation for the top-shelf, New York-focused, lockstep firms — a compensation scale that then becomes the benchmark for Biglaw around the country. I will call these firms the “Fab Five”: Cravath (the usual first mover), Davis (last year’s scale setter), Simpson (last year’s first mover), Skadden (2008’s first mover), and Sullivan & Cromwell (which hasn’t been a player super-recently, but I’m giving them credit for making spring bonuses happen back in 2011).
That discussion related to bonuses. But if you look at the history of base salary increases over the years, you’ll see the Fab Five dominating as well. Here’s the chronology (our “Throwback Thursday” gift to you):
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January 2007: Simpson Thacher took starting salaries from $145,000 to $160,000. That move, which seems like ages ago (because it was), came in response to financial firms — investment banks, hedge funds, private equity — taking talent from law firms (especially midlevel and senior associates). The top New York firms quickly matched Simpson — and the new pay scale gradually spread to less elite firms and to other major markets, as we lovingly chronicled in these pages.
February 2006: Sullivan & Cromwell took starting salaries from $125,000 to $145,000. That was a few months before Above the Law launched, so here is Ashby Jones’s WSJ Law Blog post about the news. Simpson and Cravath matched within two weeks (and I suspect that the matching will happen faster next time around, thanks in part to ATL and other sites that cover Biglaw comp).
Interestingly enough, as noted in this New York Times piece, the S&C move was viewed by some as a response to Quinn Emanuel — which was more of a boutique back then — raising starting salaries in 2005 to $135,000, a cut above the $125,000 going rate for Biglaw at the time. So boutiques and other smaller firms shouldn’t be dismissed as completely irrelevant to Biglaw pay setting; as more of them pay better than Biglaw, siphoning talent away from Cravath and S&C and toward members of the $160K Plus Club, the pressure for a pay hike grows.
Also, note how S&C’s move to $145K was followed by STB’s move to $160K in a little more than a year. Now that we’re coming up on almost a decade of pay scale stagnation, it’s hard to imagine two base-salary bumps in rapid succession. Thanks, Great Recession.
February 2000: Around this time, Davis Polk raised starting salaries from (roughly) $105,000 to $125,000, as noted in this New York Times article (dated February 2, and referring to a DPW announcement made “in the last week”). This raise was also driven in part by a non-Biglaw firm: the Silicon Valley powerhouse of Gunderson Dettmer, which raised to $125K prior to Davis in order to stem defections during the first dot-com boom.
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It’s interesting to see DPW as a compensation leader. Until Davis beat the Simpson bonuses two years ago, launching the Great Bonus War of 2014, it was regarded as a follower rather than a leader on pay. But that’s not entirely fair, considering that it did lead the third most-recent round of salary increases.
So to recap, the last three rounds of Biglaw pay raises, dating back more than 15 years, were led by Simpson (2007), Sullivan (2006), and Davis Polk (2000). This leaves Cravath and Skadden as the two Fab Five members who haven’t led a salary hike in this millennium.
Personally I’d bet on Cravath. It is still, in the minds of many, the quintessential Biglaw firm, synonymous with profit, power, and prestige. It’s smaller than Skadden, with less than a third of the headcount, and almost all of its lawyers are based in New York, so CSM would have an easier time than SASMF in terms of rolling out a pay raise. Skadden would have to decide, for example, whether it wants to raise salaries in all of its offices, both around the nation and around the world.
That’s just my guess, and I might be wrong. It’s also possible that the next round of raises could start with a firm outside the Fab Five — such as the aforementioned Quinn Emanuel, which likes to shake things up and has the money to do it (profits per partner of $4.4 million in 2015, second only to Wachtell Lipton).
Readers, what do you think? Take our reader poll:
Who will lead the next round of Biglaw base salary raises?
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Earlier: NY To $190K: 5 Arguments In Favor Of A Biglaw Pay Hike
David Lat is the founder and managing editor of Above the Law and the author of Supreme Ambitions: A Novel. You can connect with David on Twitter (@DavidLat), LinkedIn, and Facebook, and you can reach him by email at dlat@abovethelaw.com.
