Associate Bonus Watch 2009, Associate Salaries, Partner Profits

Morgan Lewis: Not Enough Pie for Everybody

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The profit gods did not smile upon Morgan Lewis & Bockius in 2009. Not on the partnership, not on the associates. We’ve already reported on MLB’s various attempts to change its associate pay scale. But making employee costs “merit-based” wasn’t enough to keep Morgan Lewis profits growing. Am Law Daily reports:

Morgan, Lewis & Bockius saw declines in revenue and profits in 2009 as a general economic slowdown and a hiring spree impacted the firm’s bottom line.
As of September 30, the end of Morgan Lewis’s fiscal year, 2009 revenue declined by nearly 5 percent to $1.07 billion from $1.12 billion in 2008. Profits per equity partner (PPP) dropped 15 percent to 2006 levels. The firm’s 2009 financials contrast sharply from 2008–that year, Morgan Lewis saw an 8 percent boost in PPP.
“We knew we dodged the bullet [in 2008], but we knew the hit was coming later,” says managing partner Thomas Sharbaugh.

Hiring spree? Morgan Lewis has deferred associates, laid off associates, and canceled its summer program. I think MLB has been on a different kind of “spree” — the kind that racks up a body count.

The firm’s cost cutting measures were more than counterbalanced by significant new investments in lateral hires, says Sharbaugh. Morgan Lewis hired 55 new lawyers in the last fiscal year, nearly double the number of lateral hires made in 2008.

Oh, I see. Morgan Lewis is using laterals to replace people that they’ve laid off or deferred. Well, that’s a plan, I guess.
But for that plan to work, laterals have to want to come to the firm. Usually attracting laterals involves paying them competitively. Is MLB doing that?


Last month, we reported that as part of its merit-based plan, MLB was keeping salary and bonus information as secretive as possible. They’re kind of like the bizarro-Orrick when it comes to merit-based transparency.
But official vagueness can’t stop associates from comparing notes — especially when those associates feel like the firm is screwing them over. One tipster reports:

As an associate at Morgan Lewis, I’ve heard more stories of people getting screwed than I’d like to admit. In fact, I’ve only heard of ONE INSTANCE IN THE NEW YORK OFFICE WHERE AN ASSOCIATE WAS GIVEN A “BUMP” AND A CRAVATH BONUS. And I’ve talked to about 40 associates by now.

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Well, tell us what you really think:

Pathetic. Something’s wrong. Something is nauseatingly wrong. When third years billing over 2200 hours are being paid $5,000 more than first years, something’s not right. TO PUT IT BLUNTLY, I KNOW OF ONLY ONE ASSOCIATE IN THE NEW YORK OFFICE WHO IS MAKING MORE THAN THE SALARY OF AN ASSOCIATE 1.5 YEARS HIS/HER JUNIOR AT OTHER LARGE FIRMS. YES, WE ARE 1.5 YEARS BEHIND MARKET IN TERMS OF SALARY. AND WE’RE FUMING. And as you can tell, the small bonuses were not the firm’s way of keeping us happy.

I wonder if that is in MLB’s client pitches? “Come to MLB, our associates are fuming … with passion for your business.”
And it’s not just a few squeaky wheels over at Morgan Lewis. Multiple sources say that a lot of people are upset with their pay. One tipster puts it this way:

We had our reviews a while ago. Our bonuses were laughable. Most juniors I know got a bonus range from $0 to $3,700 (the $3,700 went to a junior who billed over 2000 hours). …
We had a Chat N’ Chew today where the associates are fed and get to ask a few members of management any thing they want. Generally we all fear for our jobs so we don’t ask what’s really on our minds. But there are a few brave seniors who feel secure to ask anything. The question of the lunch was whether management considered that associates might leave based on our comp and treatment. Managements response was that there is pent up attrition and there is enough supply of lawyers in the market for them to replace us.

There it is, that’s the plan coming together. Let’s deal with our “pent up attrition” by making everybody miserable. The most disgruntled (or the superstars with the best exit options) will leave … and then we can go on a lateral hiring spree.
Then again, what is MLB supposed to do? Profits are down 15%. Unhappy associate attrition is one thing; a pissed off partner exodus is a whole different problem.
THE AM LAW 100: Drop in Profits, Revenue at Morgan Lewis [Am Law Daily]
Earlier: Morgan Lewis: Details Still Sketchy on its Merit Based Compensation
Associate Bonus Watch: Orrick, A Case Study in Merit-Based Bonus Payments

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