What’s Going On With Counsel Bonuses?

What do we talk about when we talk about counsel? The nature and status of the counsel role varies widely from firm to firm. Sometimes it’s a holding pen for lawyers (especially laterals) being considered for partner, sometimes it’s tantamount to being a super-senior associate, sometimes it’s a title given to quasi-retired partner (at firms that don’t use the “of counsel” designation), and sometimes it’s some combination of these options.

Not surprisingly, compensation for counsel falls all over the map as well. As seen when we examined the treatment of counsel in the wake of the 2016 associate pay raise, counsel at some firms make barely more than what senior associates make, and counsel at other firms can earn almost $400,000. (And some counsel — like those at Wachtell Lipton, where many associates break $400,000 — earn in the high six figures, or beyond.)

Things are quiet on the bonus front right now — if you have news about a firm we haven’t covered yet (scroll through our bonus archives or check this chart to see what we’ve already hit), please email us (subject line: “[Firm Name] Bonus”) — so now is a good time to talk about counsel comp, especially bonuses. If you have info to share on the subject, please email us or text us (646-820-8477), with the words “Counsel Compensation” as the subject line of your email or in the body of your text message. Depending on on the quantity and quality of submissions, we may write a follow-up story. (We keep our sources anonymous, of course — but because counsel comp is sometimes set individually, feel free to speak in terms of ranges or approximate numbers if you are concerned about inadvertently revealing your identity in the event that we quote from your message, as we might do.)

We’ll kick off the discussion with a complaint from one of the whitest of white-shoe firms: Davis Polk & Wardwell. From one irate source:

Davis Polk STIFFED counsel this year. They pay a bigger base than other firms, and a smaller bonus, but even the smaller bonus was always part of the deal. They didn’t tell anyone that it wasn’ t being paid, and counsel only found put when, on pay day, nothing hit their accounts.

The associate bonus memo had the standard “counsel bonuses determined and paid as per usual” or something to that effect… except that they weren’t.

The firm likely had a banner year, but determined that no one would notice if they didn’t pay counsel bonuses. Yes, they did raise the base salary in 2017, but by less than the 2016 bonus, so the result was actually a pay decrease for counsel in 2017 compared to 2016.

What does this mean for the treatment of counsel compared to senior associates at DPW?

From the whispers around the office that this caused, apparently almost all counsel get paid the same, with a few getting more if they negotiated for it when they joined, as opposed to being promoted internally from associate.

With the big associate bonuses, the delta in total comp between an eighth-year associate and most of the counsel is shockingly small.

To be sure, it’s hard to feel too sorry for people earning well into the six figures (just as its hard to muster up much sympathy for millionaire Biglaw partners having to pay more in taxes). But as a matter of principle, if associates got both a pay raise (in 2016) and the usual bonus (in 2017), then why shouldn’t counsel? There doesn’t seem to be a good reason for counsel compensation to decline while associate (and partner) compensation remains the same or even climbs.

What does your firm do when it comes to counsel comp, and is it fair? Please email us or text us (646-820-8477), with the words “Counsel Compensation” as the subject line of your email or in the body of your text message; if we get enough info, we’ll publish a round-up of data points, along with commentary. Thanks.

UPDATE (1/10/2018, 5:20 p.m.): The plot thickens. A different source reports that some DPW counsel did receive bonuses, but that it’s all on a case-by-case basis:

Since at least 2012, Davis Polk has not provided every counsel with a bonus. If a bonus is paid, it’s on a case-by-case basis. Gut says that the vast majority don’t get it. The amount in December was ~5% of the counsel base pay, so quite small given the billing rate of counsel….

UPDATE (1/10/2018, 5:20 p.m.): Our original source begs to differ with the first update:

Your other source is inaccurate. Counsel have always been paid bonuses. True, it’s been relatively small compared to associate bonuses given the bigger base, but imagine the wrath if Davis Polk cut associate compensation by 5%.

The other source is making it sound like this was a case-by-case determination based on individual merit. In fact, every counsel I’ve talked to did NOT receive a bonus this year, but DID receive a bonus every prior year.

As I mentioned earlier, there may be some counsel who did receive a bonus because it was specifically agreed to beforehand. But those who are lockstep did not

Regardless of who is in the right, these divergent accounts show that when there’s a lack of transparency around compensation, rumors and confusion will reign. (By the way, we reached out to Davis Polk before publishing the original story; the firm did not get back to us.)

Earlier:

• Revamping The ‘Counsel’ Role
• What’s Up With Counsel Salaries?
• Associate Bonus Watch: What About Super-Senior Associates And Counsel?

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David Lat is editor at large and founding editor of Above the Law, as well as the author of Supreme Ambitions: A Novel. He previously worked as a federal prosecutor in Newark, New Jersey; a litigation associate at Wachtell, Lipton, Rosen & Katz; and a law clerk to Judge Diarmuid F. O’Scannlain of the U.S. Court of Appeals for the Ninth Circuit. You can connect with David on Twitter (@DavidLat), LinkedIn, and Facebook, and you can reach him by email at [email protected].