Associate Bonus Watch: Boies Schiller Pays Up To $350K
How on God’s green earth do you wind up with a $350K bonus as a Biglaw associate?
Things have been suspiciously quiet on the law firm bonus front over the past few days. Have we missed out on some announcements? If you know of bonus news we haven’t covered yet (scroll through our bonus news archives to see what we’ve already written about), please email us or text us (646-820-8477).
Today we have a little bit of bonus news to share. But it’s perhaps not as juicy as the Davis Polk announcement[1] because it’s less likely to affect the market by spreading to other firms. It comes from a firm that always blows the market out of the water, year after year: Boies Schiller & Flexner, the litigation-focused firm founded by the renowned David Boies.
In a New York Times piece from this morning’s paper (shameless plug: I’m quoted in it), Matthew Goldstein broke the Boies news:
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For now, [until Sullivan & Cromwell or other firms weigh in], Boies Schiller appears to be the firm to beat. In addition to average awards of $125,000 to $150,000, the firm is paying two associates bonuses of $350,000. Mr. Boies said those supersize payouts were a reflection of the many hours those lawyers either put in on drawn-out litigation, or on the size of the recoveries won for a client.
An associate bonus of $350,000? That’s more than what some partners make.
Those were, of course, the two top bonuses. We did some digging around and believe these to be the rough bonus numbers for Boies Schiller associates more generally (in the main offices of Armonk, New York City, and Washington, D.C.):
Class of 2014: $25,000, prorated for start dates.
Class of 2013: average bonus of around $75,000, high bonus of around $125,000.
Classes of 2012 through 2008: average bonus of around $90,000, high bonus of $350,000.
Classes senior to the class of 2008: average bonus of around $150,000, high bonus of $350,000.
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How on God’s green earth do you wind up with a $350K bonus? Earlier today, I spoke with David Boies himself to find out. Here’s a lightly edited and condensed write-up of our conversation (which assumes basic familiarity with Boies Schiller & Flexner’s unusual compensation system, in which associates basically receive a portion of the revenue they generate).
DL: Congratulations again on what looks like another excellent year!
DB: Thank you. It has been a good year in a lot of ways and a very busy year. The Starr trial [regarding the AIG bailout] was a great trial, an uphill battle, and we won’t know for some time how it will turn out. But we had good lawyers on both sides and a good judge.
DL: So about these bonuses — are they the biggest that Boies Schiller has ever paid?
DB: I believe they are — they’re probably up on average by about 5 to 10 percent over last year’s, and last year’s were probably about equal to the highest bonuses we had had before that. The bonuses this year were unsustainably large, a function of everyone working extremely hard and the firm also having some contingency-fee success.
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DL: You told the Times that you hope next year bonuses look more like the 2013 bonuses, which “reflected a more sustainable lifestyle.” But I don’t think people would describe BSF as a “lifestyle” firm….
DB: It is a lifestyle, but a particular kind of lifestyle — in which work is a very important part. [Laughter.] But what you don’t want to do is get into a situation where you’re working so hard that you’re not able to have a balanced life. I think you can do what we did for a year or two, but if we ever go into a mode of working as hard as we’ve worked over the last year, that would not be desirable.
DL: And what do you expect for 2015?
DB: I think 2015 will be a lot like 2013. We have a lot of stuff to do, a lot of cases, but it should be a little more relaxed than 2014. Every 6 or 8 years, a number of things all come together that really test the ability of the firm to get everything done, and 2014 was one of those years. We had one of those years back in 2002 as well, where a whole series of things came together at one time. When you’re working on really large cases, you don’t know when that trial will take place; it depends on unpredictable factors like what your opponent does and what the judge does. Some cases get accelerated, some get delayed, and you can wind up with a higher than average number of cases going to trial.
DL: So was 2014 the busiest year the firm has ever had?
DB: In terms of how busy we were, it’s probably the busiest year we’ve had in 10 years. In terms of the average number of hours, we were probably still lower than in 2002, which was an excruciating year. But we were a much much smaller firm back in 2002. One of the advantages of getting larger is that you have a larger base to spread things out over. But even with 275 lawyers, you can have enough things happen so that you get stretched, and that’s what happened this year.
DL: When we spoke last year, you mentioned a $300K bonus due to business-generation credit. This year the top two bonuses were even bigger. What explains the top bonuses this year?
DB: Two people got $350,000 bonuses. Each case was a bit different. One was because of substantial participation in a contingency-fee matter. One was a combination of working really, really hard and having some business-generation credit — but mostly working really, really hard, like 300- to 350-hour months. This associate got caught in one major matter and when that one finished, before he had chance to escape, he got hit with another one.
DL: It seems the big increase in bonuses at Wall Street firms like Simpson Thacher was driven by a boom in M&A and other transactional work. But Boies is mainly a litigation firm. What were the drivers of your profitability?
DB: The primary driver was going to trial or near trial, where you have massive litigation and settle on the courthouse steps, but do all the preparatory work. We also had a substantial increase in our corporate work. But because corporate work represents about 15% of the firm, if you’re really going to drive the firm’s results, it will happen through litigation.
We also had some good contingency-fee results this year, plus a couple of matters where we charged a flat fee but with a success fee, got a good result, and got rewarded. People often say our profitability is heavily influence by contingency-fee work, and there’s some truth to that, but it’s actually more influenced by flat fees, success fees, and other alternative fee arrangements. We probably have half our revenue coming from other-than-hourly fees. Those kinds of fees play a very big role in our profitability, and they play a huge part in our staffing strategies too.
DL: In what way?
DB: Because of our emphasis on alternative fees, leverage is not our friend. For most big firms, leverage is their friend. Firms like Cravath or Davis Polk or Skadden staff people on matters, pay them a lot less than they bill them out for, and pocket the difference — buying wholesale and selling retail. And inefficiency is fine if the client is paying for it; if it takes you more hours to do something, you make more money.
But for us, with a fixed fee or a flat fee, we have a tremendous incentive to be efficient. Every extra hour we devote to a case is an hour that we are essentially “paying” for, an hour that could have been devoted to another matter.
DL: On the subject of leverage, does your partnership track, structure, or size contribute to your firm’s profitability? For example, are some of the folks getting huge associate bonuses really more like junior partners at other firms?
DB: No. Most of the people getting high bonuses are associates who graduated from law school in the past 7 years. It’s very unusual for us to have someone as an associate who is more than 7 years out of law school. That occasionally happens where we hire a lateral associate who is 5 years out and we want them to be here for 3 or 4 years before considering them for partnership. But typically, after 6 or 7 years, someone will either remain as a counsel or a partner or leave.
Our partner-associate ratio is roughly 1.5 to 1. So we have very low leverage in that respect, and we’ve always tried to recruit a relatively limited number of people but make sure that they’re really good. We are low on leverage but high on quality, which allows us to do the kind of work we do, much of it on an alternative-fee basis, and be very profitable.
DL: Your name is on the door of Boies Schiller. You are obviously a huge draw to clients and a big part of the firm’s success. Do you have any thoughts about retiring? Are you still enjoying the work?
DB: Yes, I still enjoy what I do. I had a trial down in D.C. that I just finished, and I’m scheduled to start a trial on December 15. I like doing this.
Sure, I like taking time off too. I probably take off about 8 to 12 weeks a year — sailing, traveling, bike trips — but I’m not going to sit on a beach and read a novel 52 weeks a year. I like what I do, and it gives me a chance to make a difference. There’s a lot of justice still to be done. I’m having a good time and continuing to make a difference, and as long as that continues, I have no plans to change.
DL: Speaking of making a difference, congratulations on your win in Bostic v. Schaefer [the case that brought same-sex marriage to Virginia]. Any predictions on what the Supreme Court might do on marriage equality — and when?
DB: Well, I think that with the Sixth Circuit opinion [upholding same-sex marriage bans] out there, it’s very hard for the Court not to take that case. So I think that while nobody can be sure, and while the Court made a deliberate decision not to grant cert in our case or the Seventh Circuit or the Tenth Circuit cases, now that we have a contrary decision from the Sixth Circuit, my prediction would be that they are going to take that case.
And I can’t see them doing anything other than reversing the Sixth Circuit. If you read the opinions from 30 different courts — district courts and courts of appeals, Republican judges and Democratic judges, liberal and conservative judges — I just don’t see how the Court could in a principled way do anything other than reverse. Just look at the opinion in Windsor. I’m very optimistic about what the Court is going to do. This is an issue that analytically has never had two sides. There have been two sides to it emotionally and historically, but from an analytic standpoint, there has never been a justification for this kind of discrimination.
DL: Well, as someone who’s going to be exercising that right next year, I’m grateful to you and Ted Olson and your colleagues for all your work on this issue. Anything you’d like to add in closing?
DB: When people look at our bonuses, they need to keep in mind that everyone here earned their bonuses. As I’ve said before, these are not eleemosynary gestures. These bonuses are both fair and in the self-interest of the firm.
It’s in our self-interest as partners to attract, train, retain, and motivate young associates. The ability to do the kind of cases we do — and to earn the kind of money we earn as partners, which is a lot more than the associates — depends on hiring, training, and rewarding the best people. So everyone who is getting one of these bonuses at least deserves it — and maybe even deserves more.
DL: Thanks so much for taking the time, and congrats again on a great year!
[1] When the Davis Polk bonus news came out, one tipster reminded us: “Let’s not forget that a Boies Schiller partner called out Davis Polk for having low comp a few years ago. Is Davis Polk finally throwing down the gauntlet?” Perhaps — but Boies Schiller more than met the challenge.
Big Law Firms Bring Back Hefty Bonuses for Associates [DealBook / New York Times]
Boies Schiller: Work Hard–Very Hard–Then Count the Moolah [The Careerist]
Earlier: Associate Bonus Watch (2013): A $300K Bonus At Boies Schiller
Associate Bonus Watch (2012): Big Bucks at Boies Schiller
Associate Bonus Watch (2011): Boies Schiller Shellacks Cravath
Associate Bonus Watch (2010): Boies Schiller Sets the Bonus Bar
Associate Bonus Watch (2009): Boies Will Be Boies
