Bonuses, Killing Lockstep, Salary Cuts, Salary Freeze

Morgan Lewis Delays the Death of Lockstep

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In July, Morgan Lewis & Bockius announced that it would be ending lockstep compensation for its associates in 2010. At the time, the firm furnished this statement to Above the Law:

“We’re running our own business and focusing relentlessly on client relationships,” said Francis M. Milone, Chair of the Firm. “Doing so responsibly means continuing to reduce expenses, committing to the people in whom we are already invested, and looking at compensation across the board to ensure our structure matches the reality the entire legal industry must face.”

The July announcement was the culmination of the effort made by MLB and its chairman, Francis Malone, to reform the Biglaw business model. Back in April, Milone gave an interesting interview to the Philadelphia Inquirer:

Question: Law firms are still very profitable. Why do they need to downsize?
Answer: You have to make a judgment about whether you can keep people busy going forward. It is not healthy for a lawyer to not be busy, to have free time on his or her hands. You don’t grow, you don’t develop, you’re not happy.
And from a cultural perspective, you don’t want to build a firm that culturally is populated by a lot of people, or too many people, who don’t have enough to do.
Q: Is that the only reason?
A: The other piece of it is the feedback we got from clients. Because they’re looking at the way they want law firms to act. They’re not going to be as willing to pay, frankly, to train new lawyers. So it’s going to be harder to find things for new lawyers to do. And when we’re paying new lawyers $160,000 and clients don’t want to pay for them, you’re putting them in a position where there may not be a lot of things for them to do.

Well, 2010 is almost upon us. But MLB is suddenly not so excited about ending lockstep compensation. Milone conducted a firm-wide video conference yesterday, and tipsters report his enthusiasm for ending lockstep compensation was noticeably lacking.
Details and a statement from the firm, after the jump.


Tipsters report that at yesterday’s video conference Milone said the move away from lockstep would be delayed “indefinitely,” but not forever. Morgan Lewis still plans to implement its “death to lockstep” plan at some point.
Here are the other headlines from yesterday’s video conference:
* there will not be across-the-board salary cuts;
* there may be compensation reductions based on performance;
* there will be bonuses, but they don’t know how much; and
* no word on salary increases at the first of the year.
A spokesperson for Morgan Lewis gave Above the Law this statement about the firm’s associate video conference:

As our chair told the firm yesterday, we are not implementing a competency based promotion model until we have taken the time to consider carefully all of the feedback we have solicited and received, and continue to solicit from partners and associates.
We will not be engaging in any across-the-board base compensation reduction this year, and our evaluation and compensation processes will proceed this year as they have in the past.
We already consider individual associate performance and contribution to client service in determining total compensation for our associates, and will continue the process of moving away from a lockstep compensation system.

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We’ve already discussed the fact that many MLB associates expect base pay to be cut, regardless of whether or not overall salary remains consistent “across the board.” But there is always room for those people to be surprised.
But it will be really interesting to see if Morgan Lewis raises base salaries at the beginning of 2010. Morgan Lewis froze salaries in 2009. Second-year MLB associates are still being paid like first-years. Will those people get a raise as they start their third year at the firm?
It should be an interesting winter.
Earlier: Morgan Lewis Cancels 2010 Summer Program
War on First Years
Morgan Lewis’s New Compensation Structure = Less Base Compensation?
Nationwide Pay Freeze Watch: Morgan Lewis Freezes Even Though They Said They Wouldn’t

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