What Have We Learned From Biglaw Bonus Season So Far?

Making sense of the first two weeks of bonus season.

When Cravath broke its bonuses early this year — at least early based on the last few years — firms across the legal landscape scurried to react to the latest salvo from the once and future compensation lodestar. Is it problematic that industry-wide compensation is set by a tacit agreement to issue carbon-copy compensation based on one player? YEP! But welcome to the legal profession.

While we don’t have a particularly large sample size of matching firms yet, we can still take a step back at this point and divine a few clues about the legal industry based on what we’ve seen so far.

Where is everybody?

Last year, by our count, 26 firms announced bonuses within five days of Cravath’s announcement. This year, even forgiving a Thanksgiving holiday in the middle, we’re not approaching that two weeks in. So what’s going on? Are firms gun-shy after a round of summer salary increases and bonuses? Have we finally hit the breakpoint — long whispered about — where the Am Law 50 is going to break away from the Am Law 51-200, with the latter simply unable to match what the top tier is paying? Has Thanos obliterated the leadership of mid-tier Biglaw?

Perhaps this speculation is still premature. It could also be that the rest of the legal world was simply caught off guard by Cravath’s sudden announcement. Global firms with multiple stakeholders may have already scheduled their bonus meeting for late this week, never expecting Cravath to jump the gun and return to the earlier date that used to prevail.

Still, as days pass, associates get more and more concerned. Even at shops that will ultimately match, what confidence do young lawyers have if the firm is timid enough to pause when confronted with a direct match of 2017’s numbers — plus whatever was given over the summer, of course.

It pays big to go small

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While the Biglaw firms just outside the very top tier may have some financial jitters, the elite boutique world continues to pay off as well or better than Biglaw. From Kaplan Hecker & Fink to Wilkinson Walsh + Eskovitz, boutiques are continuing to deliver top-notch bonuses, exceeding what the bigger firms are generally paying.

And that’s not really a surprise. These firms recruit the most sought-after young legal talent to tackle complex matters efficiently.

But there’s a lesson here for Biglaw: if large firms want top talent, they should consider thinking outside the box. And, no, just offering premiums for high billers isn’t the point. Rewarding those who put in more hours fulfills the compensatory role of a bonus, but doesn’t necessarily address the talent retention role. The best lawyers sometimes have slow years — in fact, anecdotally, they often do as their time gets monopolized by a handful of partners keeping the talent from getting spread thin — so just bumping up pay for high hours isn’t really useful.

Whatever the solution, bonus season is proving once again that Biglaw is stuck in a rut and it needs to find a way out.

‘Holiday Bonuses’ are actually about the holidays again

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There are still firms out there committed to pushing their bonus distribution date into 2019, but so far the movers are mostly handing out bonuses in time for the holidays.

It was always a bush league move to hand out bonuses deep into the following year — a transparent ploy to disrupt the plans of associates aiming to depart the firm after receiving their bonus. If a firm’s associates are handcuffed to the firm for another three months, they miss out on the opportunities pursued by everyone else.

But these days, the lateral market is a year-round endeavor and firms are even offering to cover the difference on bonuses for talented lawyers to jump ship early. The value of jerking around an associate just isn’t as pronounced as it was 10 years ago. So far, it seems as though firms have recognized that.

The market is playing it safe

After paying out higher salaries and summer bonuses, the market has opted for stability with the same bonus schedule as last year. Not that anyone’s complaining, especially armed with those summer bonuses, but one can’t help but wonder if the market — even at the top — is a little worried about over-extending themselves right now.

Demand growth is still modest and the economy continues to send off jittery vibes. If you understand the summer flurry as primarily a cost of living adjustment, then Biglaw has really delivered a reasonably cautious year when it comes to compensation. What will 2019 bring?

Probably a lot more of the same.


HeadshotJoe Patrice is a senior editor at Above the Law and co-host of Thinking Like A Lawyer. Feel free to email any tips, questions, or comments. Follow him on Twitter if you’re interested in law, politics, and a healthy dose of college sports news.


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