Law firm consultants have endless advice about how best to compensate partners at firms. The consultants analyze the extremes: Lockstep compensation avoids quibbles about pay, but it may reward less productive older partners at the expense of the young turks. Eat-what-you-kill compensation rewards people who bring in business, but may cause bitter fights over client origination credit or cause partners to hoard their clients.
Various permutations on those extremes have their own advantages and disadvantages. But riddle me this: Why don’t we see consultants debating the pros and cons of pure black-box compensation? Under this system, the managing partner (or a small committee) sets compensation for each partner in the firm. There is no specific formula for allocating the spoils, and partners are forbidden from discussing their compensation with each other. Each partner is told what he’ll make in the coming year (either as an absolute number or as a projected draw assuming the firm hits 100 percent of budget), and the process is over.
At least a few large firms use black-box compensation systems, so this subject surely deserves a moment’s thought. What do you think of a black-box compensation system — good, bad, or indifferent?
Ed. note: This is the second column by Anonymous Partner based on his interview of a more-senior partner, “Old School Partner” (“OSP”). You can read the first column in the series here.
“It was a nice profession,” Old School Partner told me, especially for a senior partner at a white-shoe firm. Collegiality, interesting work, and a good living were his. Despite occasional internal dust-ups about compensation within the partnership, partners were generally content with what they were making.
But things were about to change, and what had been a guarded and close-knit segment of the legal profession was soon thrust into an unwanted spotlight. It was a “watershed” moment for partners.
The “watershed” that mucked things up? The launch of American Lawyer magazine….
Earlier this week, we wrote about the lavish payments that Dewey & LeBoeuf made to its former executive director, Stephen DiCarmine, and its former chief financial officer, Joel Sanders, in the year leading up to the firm’s bankruptcy filing. Each man received almost $3 million in salary, bonuses, and expense reimbursement. (There’s additional detail and number crunching over at The Lawyer.)
Today we bring you additional interesting information from — and speculation about — the Dewey bankruptcy filings. For starters, who are the two Dewey partners who received more than $6 million each in the year leading up to the Chapter 11 petition?
Ideally, prosecutors can afford a bed instead of just a park bench.
Did you hear the one about prosecutors going on strike? No? Me either, until now. A county DA’s office in the San Francisco suburbs announced this week they are considering striking to protest new, unpopular labor contract.
As David Lat said when I told him about the story, “Wow, that’s wild.” The idea of prosecutors going on strike struck Lat as comparable to the prospect of police officers going on strike.
Why exactly does the prosecutor’s office feel like a walkout might be justified? Maybe being “the most understaffed, overworked prosecutorial unit in the Bay Area” has something to do with it…
* Apple is considering digging its greasy Gorilla Glass hands into Twitter. How long until they unveil the iChirp and the iStupidDessertPic? [New York Times]
* I’m sorry your three-year-old shot you with your Glock. Perhaps the safety could be better, but perhaps you shouldn’t have left a loaded gun within reach of a toddler, either. [JD Journal]
* Mitt Romney hightailed it out of England as fast as he could. He spent Sunday at the Western Wall in Jerusalem. I don’t think it’s hard to guess what he was praying for. [Washington Post]
* Bad day: getting your hand bitten off by an alligator. Worse day: facing charges of “unlawful feeding” of said alligator. Do I even have to say this happened in Florida? [ABC News]
* In continuing stupid Olympic news, NBC has caught a bunch of flak for cutting a tribute to victims of terror attacks from its U.S. broadcast. Apparently the segment wasn’t “tailored for a U.S. audience.” Well, neither is Mr. Bean. And we handled that fine, right? [Gawker]
* I just got back from Alaska. I’m so excited to go back indoors and get back to my desk after flying around mountains and looking at stupid, ugly glaciers for a week. #Sarcasm. [Twitter]
Last year, all things considered, wasn’t a bad year for Biglaw. The law firms of the Am Law 100, for example, experienced decent growth. In 2011, for the Am Law 100 as a whole, gross revenue grew by 5.3 percent, revenue per lawyer grew by 1.9 percent, and profits per partner grew by 3 percent. It was a perfectly fine year for partners.
How did their counterparts on the corporate side fare? Alas, not as well, according to Corporate Counsel’s latest compensation survey of the nation’s general counsel. Base pay for GCs in the survey declined by 1.8 percent, to an average of $611,411. Bonuses and nonequity incentive pay slid by an even larger number, 7.7 percent, to an average of $1,125,458. Meanwhile, in terms of non-cash compensation, the average stock award fell by 10.8 percent, to $1,426,325, and the average stock option award dropped by a whopping 18.7 percent, to $732,453.
These are just the top-line figures — which, of course, conceal a lot of individual variability. Let’s take a look at some specific names and numbers, as well as the top ten highest-paid general counsel….
It’s getting hot in herre [sic] — and not just due to the scorching temperatures we’re experiencing here in New York City. Today we’re experiencing a flare up of Biglaw bonus news. And maybe some partners are starting to sweat, thinking about whether they might have to cough up some extra cash to keep their associates happy.
Okay, that might be a bit of a stretch. The notion of widespread midyear bonuses, comparable to the spring bonuses we saw in 2011, remains laughable an outside possibility. But it’s a little less crazy than it might have seemed a few weeks ago, now that multiple firms have plunged into the summer bonus pool.
The mere fact that it’s paying mid-year bonuses puts Quinn in the top tier of Biglaw. How many other major firms are paying such bonuses this year? The only other one that springs to mind for me is Sullivan & Cromwell (and this year’s S&C spring bonuses were nothing to write home about; but hey, at least S&C paid something).
UPDATE (11:01 AM): We’re just now receiving word of the Cahill summer bonuses. We’ll be covering them in more detail in a forthcoming post. If you have info or opinions to share — by the way, we don’t have the full scale yet — please email us or text us (646-820-8477 / 646-820-TIPS).
So how much are we talking about for the Quinn summer bonuses? And how are QE associates reacting to the news?
I worked for twenty years at the darkest of the black-box compensation law firms: No one knew what anyone else was being paid, and the firm forbade talking about compensation. Here’s the curious part: We obeyed.
I saw the raised eyebrows of partners considering moving laterally to my firm: “Right — no one talks about compensation. You guys must talk about it all the time, just like we do at my firm. It can’t be a secret.”
Wrong. We really, honest-to-God did not talk about compensation. The subject just didn’t come up.
I’ve heard second-hand that this is true for other black-box firms, too. The managing partner of a different large, black-box comp firm recently told one of my colleagues: “Once you take compensation out of the limelight and forbid people from talking about it, then people stop talking about it. The subject drops off the table.”
That sets the stage: At firms where lawyers are permitted to talk about each other’s compensation, they do. And at firms where lawyers are prohibited from talking about compensation, they don’t.
Riddle me this: In corporate law departments, we are not prohibited from discussing each other’s compensation, but we don’t do it anyway. Why is that?
Hey, have you read Above the Law for like one single minute in the past month? If so, you probably know that we’re having this big blogger conference on March 14th at the Yale Club. Yeah, the Yale Club. You’ll be able to recognize me: I’ll be the only big… blogger guy surreptitiously holding a can of crimson spray-paint.
Speaking of coming, you should come. We’ve got CLE and all that. Click here to buy tickets to get CLE credit for listening to bloggers scream about stuff on the internet.
To refresh your memory, details on the panel that I’m moderating — almost entirely sober, mind you — follow.
My panel is called Blogs as Agents of Change, and we’re going to talk about whether all of these spilled pixels are actually making a difference. You know my view… just ask Lawrence Mitchell, but here are the panelists:
So you spent a considerable amount of time courting, selling and maybe even doing some friendly stalking of that attractive lateral partner candidate with a sizable book. After he or she ignored your emails and didn’t return your calls, a few weeks go by and you read a press release in the legal media announcing the recent move to a competing firm.
Rats. Another one got away from you. You cringe when you consider how much time was spent in meetings that did not bear fruit. Your heart aches when recall how you were led to believe this was a marriage made in heaven.
You have been rejected.
The sting of rejection is painful, even for fancy law firms. But you need to find a way that you can turn this disappointment into a legitimate learning experience.
No, this isn’t a pre-party before we come back next fall for the real thing. This IS the real thing. Quinn Emanuel is pushing the envelope on recruiting. The party is now. This is when you meet the partners and associates face to face. This is when we begin the dance that could land you an offer for your second summer BEFORE school starts in the fall.
First: You come to the party. Second: If you like us, you send your resume after June 1, 2014. Third: If we like each other, you get an offer.
We’re not waiting for fall. We’re not doing the twenty minute thing. This party is the real thing!
We hope you’ll join us, and look forward to meeting you.
The traditional job application and interview process can be impersonal, and applicants often struggle to present themselves as more than just the sum of their GPAs, alma maters, and previous work history. ATL has partnered with ViewYou to help job seekers overcome this challenge. ViewYou NOW Profiles offer a unique way for job seekers to make a personal, memorable connection with prospective employers: introduction videos. These videos allow job candidates to display their personalities, interpersonal skills, and professional interests, creating an eDossier to brand themselves to potential employers all over the world. Check it out today!