Summary: Law firms are likely not to increase year end bonuses this year for junior attorneys.
Elite New York law firm Cravath, Swaine & Moore LLP decided to be a Scrooge this holiday season. The firm told its junior lawyers on Monday that none of them would be getting bonuses larger than last year’s.
Law firms’ year-end bonuses are seen as an indicator of the industry’s success, and this year has been one of financial troubles. The Wall Street Journal wrote that the flatlining is a sign that law firms are “cautious about where the economy is heading” and that other firms are likely to copy the lead of Cravath, Swaine & Moore LLP.
Cravath’s range of payouts goes from less than $15,000 to $100,000 for those who have been vested for seven years or more. (For a detailed breakdown, see our coverage here.) WSJ predicts that in future weeks the firm’s peers will be matching those amounts.
Base salaries at big law firms have been static since 2007 at the rate of $160,000. Bonuses thus become the primary source of discretionary income for associates, those who crank at all the billable hours for clients that the partners and senior lawyers bring into the company.
During the recessions, bonuses dipped. Senior associates were getting approximately $35,000, a sum that some Americans make in a year, but that felt low for lawyers who were billing thousands of hours a year. Bonuses have since risen from that rate.
Two firms, Milbank, Tweed, Hadley & McCloy LLP and Paul, Weiss, Rifkind, Wharton & Garrison LLP, followed Cravath’s lead. On Monday, their chairmen told their associates that they would receive the scale set by Cravath.
It’s noted though that the Cravath industry scale could change if another major law firm announces a different bonus scale. Last year, law firms scrambled to increase their bonuses set by the scale of Simpson Thacher & Bartlett LLP after Davis Polk & Wardwell LLP paid out higher figures.
Cravath has 430 associates and plans to pay bonuses on Dec. 18. It has been involved in numerous large scale deals this years and won litigation cases. For instance, they represented Anheuser-Busch InBev when it acquired SABMiller for $107 billion, and they represented 3G Capital Partners and H.J. Heinz Co. in Heinz’s $60 billion merger with Kraft. They won litigation suits for clients such as ESPN and ABC.
Source: http://www.wsj.com/articles/bonuses-at-law-firms-likely-to-remain-flat-1449535627
Source: https://www.jdjournal.com/2015/12/08/end-of-year-bonus-time-at-cravath-swaine-and-moore/