Associate Bonus Watch 2008, Biglaw, Bonuses, Money, Skaddenfreude

Associate Bonus Watch: Cravath Offers Less Than Skadden

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If you work at Cravath, Swaine & Moore, prepare to be very, very angry. From the bonus memo just issued by presiding partner Evan Chesler:

Both 2006 and 2007 were extraordinary years for our Firm. In 2006 we paid large year-end bonuses to our associates, and in 2007 we further supplemented those bonuses. As a result of the deterioration of the business environment, the Firm’s financial performance in 2008 will not be in line with those earlier years. While the Firm believes that we should pay year-end bonuses this year, in light of the current business climate we do not think it is appropriate to pay the full bonuses that were paid in 2006 and 2007 or the additional supplemental bonuses paid in 2007.

Just yesterday, Skadden announced that they would match the 2006/2007 bonuses less the “special” bonus paid in 2007. For Cravath to come in under that number is pretty surprising. The official Cravath bonus structure for 2008 is as follows:

Class of 2008 — $17,500 (pro-rated)

Class of 2007 — $17,500
Class of 2006 — $20,000
Class of 2005 — $22,500
Class of 2004 — $25,000
Class of 2003 — $27,500
Class of 2002 — $30,000
Class of 2001 — $30,000

Suddenly, the question is no longer “Is Skadden the ceiling?” Instead, we must ponder “Is Cravath the floor?”

Done being angry? Okay. Now prepared to get very, very frightened:

Given the uncertainty of the economy and the business climate going forward, we will not be able to address the issue of whether there will be any year-end bonuses in 2009 until this time next year. However, associates should be prepared for the likelihood that the economy and the Firm’s financial performance next year will not show a significant improvement over this year and they may receive significantly reduced or no year-end bonuses next year.

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Update (6:22 PM): Of all the tips that have crashed ATL’s inbox in the last 45 minutes, this one best captures the raging rage people are feeling:

WTF does Cravath think it’s doing? They’re basically threatening no bonus for NEXT YEAR? They’re not being Nostradamus, they’re trying to force people out. Cravath associates will get that memo, collect their garbage 2008 [bonus] and lateral the hell out before they get screwed again.

Why not just conduct stealth layoffs? Forced attrition is the same thing. Go home, Cravath. You’re embarrassing yourself.

Read the full memo after the jump.

CRAVATH — MEMORANDUM — ASSOCIATE BONUSES
2008 Year-End Bonuses
November 20, 2008

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As you are all aware, U.S. and international corporations find themselves in the midst of both a liquidity crisis and a serious recession, and there are currently no indications that the business climate is likely to recover in the near or medium term. It is incumbent upon the Firm to act responsibly in the context of the new environment in which we find ourselves. With that in mind, we are writing to address certain matters relating to our clients, associate bonuses and our outlook for 2009.

The economic downturn has severely affected our clients. They are under strong pressure to cut costs dramatically, and every week brings new announcements of unprecedented numbers of layoffs. Under these circumstances, we believe it would be irresponsible and an unacceptable hardship on our clients to raise our billing rates for 2009, and we will not do so.

Both 2006 and 2007 were extraordinary years for our Firm. In 2006 we paid large year-end bonuses to our associates, and in 2007 we further supplemented those bonuses. As a result of the deterioration of the business environment, the Firm’s financial performance in 2008 will not be in line with those earlier years. While the Firm believes that we should pay year-end bonuses this year, in light of the current business climate we do not think it is appropriate to pay the full bonuses that were paid in 2006 and 2007 or the additional supplemental bonuses paid in 2007.

Accordingly, the bonus amounts for 2008 for each class will be as follows:

Class of 2008 — $17,500 (pro-rated)
Class of 2007 — $17,500
Class of 2006 — $20,000
Class of 2005 — $22,500
Class of 2004 — $25,000
Class of 2003 — $27,500
Class of 2002 — $30,000
Class of 2001 — $30,000

The bonus will be paid on Friday, December 12, 2008. Absent special circumstances (approved by the Managing Partners), an associate must still be at the Firm on December 12 to be eligible for the year-end bonus. Bonuses for senior attorneys, special associates, foreign associates and discovery attorneys will be determined on an individual basis and communicated shortly. Attorneys who were with the Firm for only part of the year or are working part-time will receive a pro-rated portion of the applicable class-level bonuses.

The Firm does not apply any billable hour or similar criterion in determining eligibility for associate bonuses. As always, while receipt of the bonuses for each individual attorney is dependent on suitable performance at that attorney’s experience level, virtually all of our associates will receive the full bonus. Given the uncertainty of the economy and the business climate going forward, we will not be able to address the issue of whether there will be any year-end bonuses in 2009 until this time next year. However, associates should be prepared for the likelihood that the economy and the Firm’s financial performance next year will not show
a significant improvement over this year and they may receive significantly reduced or no
year-end bonuses next year.

We thank you for your hard work and dedication throughout 2008. We are confident that, with your support and a continued focus on our long-term values, our Firm will continue its long-time success in providing the finest legal services to our clients.

E. R. Chesler

Earlier: Associate Bonus Watch: Here Comes Skadden

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