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BY JOSEPH GOLDSTEIN -
Staff Reporter of the Sun
November 2, 2007
The New York Sun
The race is on to see which of the city's top law firms will boast the best-paid associate.
As is common when it comes to law firm pay, the going is neck and neck. Cravath, Swaine & Moore LLP set the pace on Monday by announcing a bonus scale that, when put with salary, adds up to a total of $205,000 this year for an associate who graduated law school in 2006. Not to be outdone, about half a dozen other New York firms quickly matched Cravath.
The announcement suggests that the darkening economic landscape isn't causing too much concern that there will be a significant decrease in billable hours. And legal recruiters say the bonuses, which exceed last year's, are a signal that the next pay increase for associates could come as soon as January, the month when law firms generally announce any raise in base associate salaries. The gloomier interpretation — that these early and generous bonuses are meant to ward off a salary war next year — has few adherents.
"That's just speculation," a recruiter, Jack Zaremski of Hanover Legal Personnel Services, said. "My instinct would be the opposite. This is an indication that firms would be interested in taking base compensation to the next level as well."
Base pay among the top firms is now around $160,000 for a first year associate, a steep increase over the standard $125,000 New York's top firms paid their rookie lawyers two years ago. The pay had been at $125,000 for several years before that, without any firm raising the ante. But the $160,000 figure, still less than a year old, may not last for much longer. It has already spread to other cities across the country, causing discontent among associates here who contend with New York's higher cost of living.
That parity between associate pay here and elsewhere "can't last long" a professor at Columbia Law School, John Coffee, said. " It's natural that New York will distance itself from the national salary scale. There will be some jockeying among the firms to see who can lead the race."
But it is not clear how many firms would be willing to go higher. The sub-prime mortgage crisis has left firms' structured finance and real estate departments with less legal work overall, analysts say. While the major firms are generally well diversified in their legal practice, firms with a focus in these areas may be more affected by the economic downturn.
"Some firms are going to be embarrassed and won't be able to match any new increment," Mr. Coffee, who worked at Cravath 30 years ago, said.
The end of the year bonus that Cravath announced on Monday provides an extra $10,000 to $50,000 to associates based on seniority above last year's bonus. A blog that follows associate pay closely, abovethelaw.com, has reported that firms including Debevoise & Plimpton LLP; Simpson Thacher & Bartlett LLP; Paul, Weiss, Rifkind, Wharton & Garrison LLP; Davis Polk & Wardwell; Milbank, Tweed, Hadley & McCloy LLP have all since matched Cravath, with only minor variation. Most of the announcements came Friday.
For associates who joined in 2006, the bonus amounts to $45,000, which is $10,000 more than last year's bonus for first year associates. Second years this year will receive $55,000, which is $15,000 more than last year.
These firms are all New York-based and it is unclear whether out-of-town firms with offices here will feel the need to compete.
The end-of the year bonuses do not compare with what Wall Street hands out around this time of year, and they are not likely to keep lawyers from leaving for more lucrative jobs in finance. But they could encourage senior associates, who might be considering leaving to work as an in-house counsel, to stay on the partnership track.
"It is possible that the dollars and cents that some corporations can afford to pay will not keep up with what law firms can pay their associates," the head of the associate practice group at the legal recruiter Major, Lindsey & Africa, Sheri Michaels, said.
One employer that certainly isn't keeping pace is the federal government. The Wall Street Journal's law blog noted this week that second-year associates at these top New York firms will be earning, with bonuses, $225,000 a year, which is more than the $212,100 that the chief justice of the United States, John Roberts, is paid by the taxpayers. A significant number of the 145 commenters on the blog post expressed the opinion that the law firm associates work harder.