Above the Law

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Non-lawyers are often surprised to learn of the lockstep salary schemes of large law firms and the near-perfect information we have about them. (Recall Kevin Drum’s befuddlement at the bi-modal distribution of law graduate salaries and the “weird cultural collusion” it suggested.) Even annual bonuses are frequently spelled out in what amounts to public memoranda and are typically some variation of the “market” dictated by our Cravath overlords. Of course, there are some “black box” firms and a few gilded outliers such as Wachtell Lipton or Boies Schiller, but generally speaking, the world of large firms practices a degree of relative transparency around compensation that is unsurpassed outside the public sector.

In order to distinguish among firms, we have to look to the margins. For example, law firms vary quite a bit when it comes to paying for the bar and living expenses of incoming associates. Some firms may reimburse for covered expenses after the fact; others may pay some expenses directly to the provider. Some may give a stipend to cover living expenses, whereas others may offer the ability to take out an advance on salary.

Greater transparency (or, at least, aggregated information) on these questions might make one firm’s offer more attractive than another’s, or perhaps even give an offeree some basis for negotiating a package upgrade (but of course tread very lightly there)….

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Partnership: Biglaw’s ultimate brass ring.

Becoming a Biglaw partner does not necessarily mean you’ll live happily ever after. It doesn’t even guarantee financial security. Indeed, some partners end up filing for personal bankruptcy.

But that’s an anomalous case. Partnership at a major law firm might not guarantee you happiness — sometimes you have to leave the partnership to follow your bliss — but it generally brings with it tremendous pay and prestige.

That’s especially true of partnership at the nation’s 10 most prestigious large law firms. Most of them have only a single partnership tier — equity or bust, baby — and sky-high profits.

Who are the new partners at these 10 firms, and what do their selections reveal about Biglaw today?

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Thomas “Haller” Jackson IV

Imagine this. You graduate from law school with a 4.0, the first person in your school’s history to do so. While in law school, you serve as editor-in-chief of the law review, win the moot court competition, and get a Ph.D.

You clerk for a federal appellate judge, followed by another circuit judge — this time a prominent feeder judge to the U.S. Supreme Court. You work as an associate at an elite law firm in a major city. You then return to your hometown and clerk for not one but two federal district court judges, to round out your already amazing résumé with some time in the trial court trenches.

And then you… get a Supreme Court clerkship? Or get charged with attempted aggravated rape and solicitation of a young child….

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This is the latest in a new series of ATL infographics — visual representations of our own proprietary data, relevant third-party data, “anecdata,” or just plain jokes. This infographic is brought to you by our friends at Prestige Legal Search. Earn another $5,000 to $50,000 with their Rewards Program.

For the most part, Biglaw associate bonuses remain stuck at last year’s levels, reflecting expectations that firm profits will be flat at best. This might seem fair, with everyone feeling the pinch of the “New Normal” and so on. But when we take a small step back and see how these bonus numbers compare as a percentage of partner profits to the bonuses of just a few years ago, these bonuses are arguably pretty measly.

The current $10,000 “market” (i.e., Cravath-following) rate for first-years is just 0.29% of Cravath’s profits per partner (according to the American Lawyer). Back in 2007, first-year bonuses equaled 1.36% of PPP. In other words, the Cravath partnership was nearly five times more generous to its associates back then.

Obviously, Cravath is among the most profitable firms in the world. What are the implications of matching Cravath’s bonus scale for those firms with much lower profit margins? Today’s infographic takes a look at how big a hit to PPP partners willingly take in order to Keep Up With The Cravathians….

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As 2013 draws to a close, let’s look back at the 10 biggest stories in the legal profession over the past year. This is an annual tradition here at Above the Law, which we’ve done in 2012, 2011, 2010, and 2009. We’ll fire up the old Google Analytics machine to get data on our most popular posts, based on pageviews, and share the results with you.

Before turning to specific stories, let’s look at the top general discussion topics here at ATL. For 2013, our most trafficked category page was Biglaw, which bumped Law Schools out of the top spot — a spot that Law Schools held from 2010 through 2012. Now that the word is out about the perils of getting a law degree, leading to plummeting applications, perhaps it’s time to move on from the “don’t go to law school” narrative.

After Biglaw and Law Schools, our third most-popular category page was, as usual, Bonuses. This wasn’t a terribly exciting year for bonuses — there were no spring bonuses, and Cravath and its many followers paid out the same bonuses as last year — but people still want to know the score.

Our fourth most-popular category page was small law firms. Small firms, including boutiques, are an area of increasing focus and readership for us — and also where many of the job opportunities are these days.

Moving on from the topic pages, what were the 10 most popular individual posts at Above the Law in 2013?

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In an era when “disruption” is celebrated, the world of large law firms is one of the last redoubts of conventional wisdom. For a uniquely rule- and precedent-bound profession, this makes sense. Biglaw’s conventional wisdom has the added virtue of being reliable. For example, we can count on Cravath taking the lead — at least chronologically — on bonuses, and for DLA Piper to have the most random Third developing-world offices.

Another reflection of conventional wisdom is the way in which Biglaw lends itself to — and revels in — superlatives and rankings. There tends to be a generally acknowledged and perennially dominant player (or a few) in most practice areas: Wachtell Lipton for M&A, Weil Gotshal for Chapter 11 work, Patton Boggs for lobbying, and so forth. There’s no doubt that many worthy firms get overlooked.

Last year we took a look at which firms’ practice groups were considered “underrated” by peers in the field. Among the notable 2012 nominees: Cahill for corporate law, Arnold & Porter in litigation, and Proskauer for its bankruptcy and tax practices.

We wondered whether the same practice groups were still considered by practitioners to be unfairly underrated. Or are there other firms deserving more recognition?

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Lat here. Going into the 2013 Biglaw bonus season, indicators were looking mixed.

Cravath, the supremely prestigious and profitable law firm that’s the traditional market leader on bonuses — as in the firm most widely followed by other firms, not necessarily the firm that pays the biggest bonuses — announced another large partner class. Last year, that boded well for bonuses.

On the other hand, Biglaw’s overall performance has been somewhat anemic this year. The stock market might be hitting new highs, but many law firms are running in place.

People have been waiting forever for Cravath to make its big announcement. Now the wait is over: at 4:45 p.m. today, Cravath announced its 2013 year-end bonuses.

How are they looking? What’s getting stuffed inside associate stockings this holiday season?

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It’s Tuesday, November 26, past 5 p.m. Do you know where your bonus is?

When we surveyed our readership about 2013 law firm bonuses, 57 percent of respondents predicted that the first firm (traditionally Cravath) would announce during the week of Thanksgiving. That’s basically over. It’s theoretically possible we could get an announcement later tonight or sometime tomorrow, but it seems unlikely.

So what’s going on? Where. Are. The bonuses?

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Ed. note: This is the latest installment in a series from Bruce MacEwen and Janet Stanton of Adam Smith Esq. and JDMatch. “Across the Desk” takes a thoughtful look at recruiting, career paths, professional development, human capital, and related issues. Some of these pieces have previously appeared, in slightly different form, on AdamSmithEsq.com.

For years, I’ve been hearing firms describe their cultures as “entrepreneurial,” and I hardly paid the slightest attention. Like “collegial” or “collaborative,” it just seemed like so much white noise. Then finally I heard it once too often and had to face cold reality: I had absolutely no idea what these people — a lot of smart, articulate people — were talking about.

Let’s go to the dictionary, where we find:

/äntrəprə no͝orēəl/

1. characterized by the taking of financial risks in the hope of profit; enterprising

Other notions orbiting around the concept of entrepreneurism include engaging in genuine innovation and invention (to the extreme of shattering the status quo), proceeding decisively in the face of profound ambiguity and uncertainty, and shouldering the personal risk of sacrificing years of reliable income provided by others for whatever rewards you can persuade the market to deliver — with a meaningful risk those rewards could be nonexistent.

This is an audience participation column, so I ask you this: Would you describe your own firm as “entrepreneurial?” Are there firms you admire or look down upon that you’d describe as “entrepreneurial?” What mental image or behavior, what cultural archetype or partner personality type, pops into your mind when “entrepreneurial” is used to describe a firm?

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It’s nearly that time of year, when all the grueling hours that Biglaw associates have put in will pay off in the form of fat bonuses. Or don’t pay off, with miserly bonuses, or nothing at all. Or something in between? Point being, we have no idea how the 2013 bonus season will play out. Presumably, the answer is buried somewhere deep in Allen Parker’s unknowable heart.

The signs thus far are not especially encouraging, at least for those with a vested interest. (Admittedly, for most, this is all much ado about white-shoe people problems.)

Yes, Cravath might be doing well, at least if its large partner class is any indication. But on the subject of law firm 2013 profits in general, the Citi Bank Private Law Firm Group’s report on the first half of the year concluded:

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