Associate Bonus Watch: Cravath Announces Its 2016 Associate Bonuses!

Hooray! The 2016 Biglaw bonus season is now underway!

This DEFINITELY merits the Drudge siren.

Not a huge surprise, but we always break out the Drudge siren for this.

If you were among the 40 percent of our readers who predicted that bonus news would drop this week and the 72 percent who predicted that bonus amounts would be the same as last year, pat yourselves on the back.

Biglaw’s compensation leader, Cravath Swaine & Moore, just announced its 2016 year-end bonuses — on a Monday afternoon, keeping with tradition. Here is the CSM bonus scale, which should look familiar to you:

Class of 2016 — $15,000 (pro-rated)
Class of 2015 — $15,000
Class of 2014 — $25,000
Class of 2013 — $50,000
Class of 2012 — $65,000
Class of 2011 — $80,000
Class of 2010 — $90,000
Class of 2009 — $100,000
Class of 2008 — $100,000

bonus money cash billsYes, this is the same bonus scheme we saw in 2015 (from Cravath) and in 2014 (from Davis Polk). But there is, of course, one huge difference: back in June, Cravath raised base salaries for its associates, a move that led dozens of firms around the country to hike associate pay.

Cravath announced the pay raise in June, and it took effect on July 1. So this year, an associate finishing her first full year at Cravath will earn around $185,000 in total compensation ($160,000 for the first half of the year, $180,000 for the second half of the year, and $15,000 in bonus money), up from $175,000 last year. At the top of the scale, an eighth-year associate will earn almost $400,000 in total compensation ($280,000 for the first half of the year, $315,000 for the second half of the year, and $100,000 in bonus money), up from $380,000. If these compensation levels hold for 2017, first-years will earn $195,000 and eighth-years will earn $415,000 for the full year.

We have posted Cravath’s complete 2016 bonus memo on the next page. As you’ll see, its language is very similar to the 2015 bonus memo. Bonuses will be paid on Friday, December 16. The memo once again explains Cravath’s lockstep, non-hours-driven approach to bonuses: “The Firm does not apply any billable hour or similar criteria in determining eligibility for associate bonuses.” It also contains the usual fine print about pro-rated bonuses for part-time work and individualized bonuses for lawyers who aren’t standard partnership-track associates.

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What to make of these bonuses? I agree with my colleague Staci Zaretsky, who last week wrote, “Be thankful that your salary is larger than it ever was before and that you’re receiving very generous bonuses on top of it.”

At Cravath and its peer firms, M&A work plays a major role in profitability. According to Thomson Reuters, for the first three quarters of 2016, worldwide M&A activity was down by 22 percent from the comparable period in 2015. Furthermore, per Citi Private Bank, demand for Biglaw work is stagnant, while expenses are growing (driven in part by the Great Associate Pay Raise of 2016).

Given these realities, and given the pay raises awarded earlier this year, firms would have been entirely justified in trimming bonuses (as some firms threatened to do when announcing raises). But Cravath has not reduced bonuses, meaning that its peer firms won’t either. From the associate’s point of view, this strikes me as very good news indeed.

Is it possible that some rival firm might come along and beat the Cravath scale? It seems highly unlikely, but I won’t say impossible. Recall how Davis Polk trumped the Simpson Thacher scale back in 2014, unleashing a slew of retroactive raises to Biglaw bonus scales. So stay tuned.

That’s our take on the Cravath bonuses. What do you think? Feel free to let us know how you feel by email, by text message (646-820-8477), or by tweet (@ATLblog). We might update this story by quoting your comments — anonymously, per our standard operating procedure — if we find them to be insightful or amusing. You can also vote in the reader poll we’ve embedded below.

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Please help us help you when it comes to bonus news at other firms. As soon as your firm’s bonus memo comes out, please email it to us (subject line: “[Firm Name] Bonus”). We always keep our sources on bonus stories anonymous. There’s no need to send the memo using your firm email account; your personal email account is fine. 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. You can also text us if you prefer, at 646-820-8477. Thanks for your help.

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Happy bonus season!

UPDATE (3:04 p.m.): Early reactions from our Cravath sources are positive:

  • “Pleased to see that the scale looks like last year’s (and they didn’t use the salary increase to justify slashing bonuses).”
  • “Same as last year. Most people here expected this and are OK with it, considering the bump in comp this year.”

What do you think? Take our poll below.

UPDATE (3:29 p.m.): FWIW, we predicted these bonuses back in June, when we broke the news of Cravath’s pay raise. At the time we wrote, “What does this mean for bonuses? The memo says nothing about bonuses. We’re guessing that Cravath will at least keep bonuses the same as last year.”

UPDATE (5:45 p.m.): Less than three hours later, we have our first two Cravath matches.

UPDATE (11/29/2016, 10:00 a.m.): Simpson Thacher, one of the firms that might have topped Cravath, just matched.

UPDATE (11/29/2016, 10:49 a.m.): I discussed the Cravath bonuses with Casey Sullivan of Big Law Business. And here’s additional coverage of the Cravath bonuses, from the ABA Journal, the American Lawyer, the New York Times, and the Wall Street Journal.

My reaction to the Cravath bonus announcement is:

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(Flip to the next page to read the complete Cravath bonus memo.)

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DBL square headshotDavid Lat is the founder and managing editor of Above the Law and the author of Supreme Ambitions: A Novel. He previously worked as a federal prosecutor in Newark, New Jersey; a litigation associate at Wachtell, Lipton, Rosen & Katz; and a law clerk to Judge Diarmuid F. O’Scannlain of the U.S. Court of Appeals for the Ninth Circuit. You can connect with David on Twitter (@DavidLat), LinkedIn, and Facebook, and you can reach him by email at dlat@abovethelaw.com.


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