Cravath, Swaine & Moore has raised the salary bar for law firm associates in Manhattan.
The firm has announced that it will award a special one-time bonus for associates in addition to the traditional year-end bonus that the firm, like most others, already pays. All but the newest associates will receive $10,000 to $50,000, depending on seniority, which was first reported by Abovethelaw.com.
The first firm to announce bonuses usually sets the tone for the other law firms. Cravath’s announcement also came early because law-firm bonuses are typically decided later in the year.
Evan R. Chesler, Cravath’s presiding partner, said there was no particular significance to the timing. He said the announcement was not tied to recruiting, which is in full swing. Instead, he said, the firm wanted to “thank our lawyers for the hard work this year and the good year we’ve had.”
“It’s a one-time event based on the performance of the firm and the contribution,” Mr. Chesler said. “We had decided it now and since we made the decision, there was no reason not to tell people and give them the money.”
At the same time, Cravath associates learned that annual bonuses would remain at last year’s levels, meaning that a current third-year associate, for example, would receive the same annual bonus as a third-year associate in 2006.
An associate who graduated in 2006 will receive total compensation of $205,000: $160,000 in base salary with the $35,000 year-end bonus and the additional payment announced this week. Both base and bonus increase each year that an associate works at a firm.
If previous salary increases are any indication, once one firm announces an increase, in whatever form, others usually follow within short order.
Surprisingly, several partners at other firms said they had not yet heard about the increases — either from other partners or their associates, who are not shy about mentioning what other firms pay. But a spokesman at Shearman & Sterling said, “We’re aware of recent developments, but are not prepared to comment.”
Martin F. Evans, Debevoise & Plimpton’s presiding partner, said in an e-mail message that the firm expected “to announce this week fully competitive annual and special bonuses.”
This year, Simpson Thacher & Bartlett, raised first-year associate salaries from $145,000 to $160,000. Other firms quickly matched that. Whether Simpson will follow Cravath this time is not known; Philip T. Ruegger III, the chairman of Simpson’s executive committee, could not be reached for comment.
But Sullivan & Cromwell, which began a round of salary wars in 2006 when it increased first year pay to $145,000, is likely to match soon. A law firm partner, Gandolfo V. DiBlasi, said, “We’ve always paid at the top and we intend to this year.” He declined, however, to say whether Sullivan & Cromwell would bifurcate its bonuses like Cravath or increase the total year-end bonus.
The structure matters. By awarding a special bonus, Cravath is not tied to the amount for next year. Mr. Chesler said that “it’s an uncertain economy,” and said that unlike a corporation that had retained earnings, law firm partnerships “distribute net income above expenses, and part of that is what we pay our employees.”