Reflections On The Summer Of MoneyLaw From A General Counsel And Managing Partner

The frenzy around the Biglaw associate salary brinkmanship finally seems to have settled down.  As we catch our breath, we  teamed with our friends at Lateral Link to chat with a couple of legal industry leaders to glean their insights on the implications of this brave new salary market. What do firms need to consider before they bump salaries, especially the answer to the “hundred-million dollar question of whether these costs will be absorbed by reallocating the profit pie among partners,” or be pushed down to clients (spoiler: hell no).

Our guests were John Hueston, co-founder of Hueston Bennigan LLP and Arash Mostafavipour, executive vice president, chief legal officer and chief compliance officer of Xome.

Hueston said while associate raises were nearly a decade in the making, firms need to consider how to compete in more creative ways rather than blindly follow in Cravath’s footsteps. They must identify business needs and goals, especially whether they are trying to compete nationally. Further, if firms do match, they would be wise not to reduce bonuses—or else the salary move will be seen as an illusory gimmick.

From the client perspective, effective communication and long-term relationships are key, according to Mostafavipour. Clients have a duty to uphold and maximize the value of their companies, so a stress on corporate legal department budgets would not be well received,  unless there is a demonstrable increase in vale.

Lateral Link’s founder and managing principal Michael Allen, sounded a note of caution.  Firms must carefully consider overall industry viability and decide how they would make up for higher associate salaries—such as hiring fewer attorneys, decreasing bonuses, or adjusting profits per partners. Making the wrong move could lead to lateral moves by key players.

Watch the full webcast below: