Quote:
Originally posted by SlaveNoMore
You haven't meet Ironweed either, I take it?
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There is nothing I hate so much as false humility.
And since it is the season for such things again, let me share with you something that reminds us all of the lofty goals we once shared as young, eager GAs -- namely, to wring more cash out of the GPs and sow confusion in their ranks.
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Jury's Still Out on Wall Street Law Bonuses
Associates at Big New York Firms,
Which Act in Lockstep, May Frown
At Verdict After Jump in Base Pay
By NATHAN KOPPEL
November 29, 2006; Page C1
Many New York corporate law firms have had banner years, thanks in part to mergers, acquisitions and private-equity transactions. But that won't necessarily translate into outsize bonuses for the staff lawyers who have put in extra-long hours.
These associates often work at the beck and call of partners, sometimes on mundane tasks, in the hope of one day becoming partners. That process typically takes at least eight years, but can put them in a position to command annual compensation in excess of $2 million.
Bonus season for New York City-based associates at big firms usually begins in early December, and there is more intrigue than usual this year, because of the possibility that firms will scale back associates' bonuses after having raised their base salaries earlier this year.
In New York -- the nation's largest and most lucrative market, thanks to Wall Street business -- bonuses for associates often have little to do with either a firm's overall financial performance or the individuals' productivity. Rather, many firms match the competition's bonuses, regardless of whether firms have had similarly good years, says Robert Link Jr., chairman of Cadwalader, Wickersham & Taft LLP.
"We all are forced to function with a herd mentality" on bonuses, he says. That mind-set has persisted for as long as some attorneys can remember.
At Simpson Thacher & Bartlett LLP, associates' bonuses aren't tied directly to the firm's profitability, nor do they depend on the number of hours billed. "Bonuses are for people performing satisfactorily or better," says Gary Horowitz, a member of the firm's executive committee. "In corporate America, bonuses are more carefully calibrated to performance."
Big New York law offices tend to take a one-size-fits-all approach to bonuses for associates, because they worry that if they fail to match market leaders, they will be branded as miserly and scare away prized law-school recruits.
Asks a partner at one New York firm: "What top-tier firm wants to go to Harvard Law School and be the one that pays $5,000 or $10,000 less" in bonuses? The concern is particularly acute, because the demand for talent in recent years has far outgrown the supply of students from top law schools.
New York lawyers also say it is easier to administer a bonus system that doesn't require an individualized assessment of each associate's contribution.
Some firms also say that younger attorneys need the freedom to develop their skills at their own pace, without being unduly concerned that slips in performance may result in lower bonuses.
Beyond the Hudson River, firms tend to apply greater bonus rigor. At Duane Morris LLP, a Philadelphia-based firm, bonuses are "based on an associate's profit contribution" to the firm, as measured in part by the number of hours billed, as well as an assessment of the quality of the associate's performance, says Chairman Sheldon Bonovitz.
At some firms, like DLA Piper LLP, it is a parallel system; in most offices, associates' bonuses depend on productivity and performance, but in the New York office, bonuses are based on seniority for all whose performance is judged to be average or above average.
Morrison & Foerster LLP, which was founded in San Francisco, "spends a great deal of time developing systems to make sure bonuses are appropriately tied to merit," says Chairman Keith Wetmore. But in its New York office, associates qualify for bonuses "if they are here, in good standing, at the end of the year." Competing for talent in the city, Mr. Wetmore adds, means "falling briskly into line" on bonuses: "You're either in or you are out."
At Wall Street banks, bonuses for stock and bond traders, no matter how junior, generally depend in part on their contribution to profits, says Alan Johnson, managing director at Johnson Associates Inc., a compensation-consulting firm.
For beginning investment bankers, bonuses tend to fall within a range, but are still pegged to individual performance, he says. Ernst & Young LLP, the accounting firm, doesn't give out holiday bonuses to its staff professionals, but awards spot bonuses, including extra vacation days, throughout the year, based on individual performance, says a firm spokeswoman in reference to its U.S. professionals.
The rules of the Big Apple law-firm-bonus game are simple: A white-shoe corporate law firm typically takes the lead by announcing the annual bonuses, which are pegged to associates' seniority. Then, most of its peer firms follow suit, sometimes within days, by announcing nearly identical bonuses.
Last year, Sullivan & Cromwell LLP was first out of the gate, announcing bonuses ranging from $35,000 for first-year associates to as much as $65,000. Then, the chase began, with top firms such as Davis Polk & Wardwell and Cahill Gordon & Reindel LLP matching Sullivan's bonuses.
In February, Sullivan & Cromwell boosted base compensation for starting associates to $145,000, an increase of $20,000. Most big New York firms matched the move.
The hope, say partners who foot the bill for associates' pay, is that this earlier salary increase will lead to correspondingly smaller bonuses, so that associates' total compensation packages will remain stable. Put another way, perhaps bonus "sanity" will prevail, says one New York attorney.
"There is a lot more talk in the air" about bonuses, says a real-estate associate for a New York firm. "Bonuses could be slashed because of salary raises, or they could go up because everyone has had a good year."
A corporate associate at another firm in the city says it is fair to base bonuses on staff lawyers' class rank, not the number of hours billed. "Associates have very little control over their hours," he says. "It depends on what practice group you work for and whether that group is busy."
This year, the question remains which law firm will take the lead. Sullivan & Cromwell hasn't yet decided what to pay, says Chairman H. Rodgin Cohen. The firm has led in the past, because "we have wanted to demonstrate our commitment to our associates," he says. "But that can't mean that every year we'll be out front."
Cravath, Swaine & Moore LLP, another market leader in prior years, isn't showing its hand, either. "We have not made a determination," says presiding partner Robert Joffe.
The bonus game is a delicate "Kabuki dance," says Mr. Horowitz, of Simpson Thacher.
Once, he explains, Simpson led and was then topped by another firm's bonus offer, forcing Simpson to then "match the topper," he says.
Eventually, though, lawyers say, one firm will go forth, setting off an almost certain chain reaction, if history is a guide.
The bonus amount will make the associates' rumor mill, and then the follower firms will convene management meetings, whereby they will announce that they have matched the previously announced bonus.
"After a firm breaks, you try to move quickly, because you get credit for not lagging," says a partner at a leading New York firm.. "It's a game of chicken; it's a little surreal."
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