Orrick, Akin, and the future of the "talent model"

See update below

As noted earlier here, Orrick, the Runaway Bride of law firm mergers, is apparently considering another tie-up, this time with Akin Gump. One obvious issue looms in any potential Orrick Gump entity: associate compensation.

Late in 2009, Orrick instituted a new compensation structure in which base salaries for first years (in major markets) start at $160,000 but each successive year, the firm pays a lower base salary than in the former lockstep model, though with the prospect of a larger bonus. Furthermore, an Orrick associate’s base salary depends on whether she is an ‘associate,’ ‘a managing associate,’ or a ‘senior associate.’ Under this model, whether there is base salary increase depends on whether an associate is ‘promoted.’  Early reviews of this approach are mixed, at best.

In our 2010 Associate Survey, the preponderance of external “Buzz” on Orrick focused—critically—on the firm’s newfangled comp scheme:  “Skewed compensation structure”; “Tinkering too much with compensation structure,” etc.

The broadest swath of internal Orrick sentiment is summarized by this cynical litigator:

“Having instituted the talent model, Orrick has now found an official way to pay associates less, under the guise of wanting to pay them more.”

However, this happier Orrick camper—in sunny Los Angeles—was by no means alone:

“We have implemented a new talent model that places a greater role on bonuses as a means of compensation as one progresses. Of the senior associates I have spoken with, the firm appeared to make good on giving large bonuses to compensate for lower base salaries.”

So who knows? It does seems unlikely however, that should the merger be consummated, that Akin Gump associates would welcome the adoption of the new talent model. After all, theirs would be the more profitable legacy firm ($1.46MM 2009 PPP vs. Orrick’s $1.36MM).

For more on the implications of an Akin/Orrick combo, check out “What would an Akin-Orrick merger look like?” (BLT) and “Making sense of the Akin/Orrick merger” (WSJ Law Blog).

-posted by brian

Should be an interesting pre-nup if Orrick & Akin get to the altar

Update, October 5, 2010: Only days after confirming their budding romance, Akin and Orrick announced Monday that the wedding is off, issuing the following joint statement:

“Orrick and Akin Gump have mutually agreed to conclude preliminary discussions regarding the possibility of a merger. The firms appreciated the opportunity to have the discussions, which confirmed their mutual respect for one another. However, the firms have determined not to proceed.”