Updated 11/26/14: Cravath has announced and will match the increased amount first announced by Simpson Thacher. Other firms have been quick to follow suit. Happy bonus season and Thanksgiving to all!
On Friday there was welcome news on the BigLaw compensation front: firms are going rogue this year with bonus announcements, in a good way. This is the pay boost that attorneys have been waiting for since the post-recession recovery. Simpson Thacher started the trend with a surprise announcement Friday morning containing news that bonuses this year will beat the Cravath scale of recent years. Paul Weiss, Milbank and Cleary followed suit shortly thereafter, and more announcements of this kind are likely to come. This is not Simpson’s debut as compensation leader: its announcement in 2007 to raise starting salaries to $160,000 (from $145,000) prompted the rest of the BigLaw gang to do the same. But salaries have remained stagnant since then, save a few outliers, and associates have been none too pleased.
I was not surprised to see Simpson and Paul, Weiss upping the ante on bonuses, given the results of this year’s Vault survey, which generated Vault’s 2015 law firm rankings. While neither firm made it into the Top 25 in the Compensation category, both ranked highly for Business Outlook (Paul, Weiss is #1, Simpson is # 13). Associates at both firms were quick to point out the disconnect between profitability and payout. A Simpson associate told us that “flat bonuses during years of outstanding performance are never something you hope for,” and a Paul, Weiss associate complained that “partner compensation is skyrocketing, and associate compensation isn't changing." Yes, it’s true: someone up there is listening.
The big winners at these firms are members of the Classes of 2006 and 2007, who will receive $100,000 bonuses this year, compared to last year’s $60,000 and $50,000 bonuses, respectively. First- and second-year associates are eligible to make $5,000 more than they were last year. Here’s the full breakdown of 2014 bonuses by class year:
Class of 2014: $15,000 (prorated)
Class of 2013: $15,000
Class of 2012: $25,000
Class of 2011: $40,000
Class of 2010: $55,000
Class of 2009: $70,000
Class of 2008: $85,000
Class of 2007: $100,000
Class of 2006: $100,000
The big question now is whether Cravath will step in and announce the same numbers. Because if they do it, so will (mostly) everyone else. But if Cravath sticks to the same modest scale of the past several years, then more associates can expect disappointment when their firms go that route as well. Not as bad as a lump of coal, but still pretty upsetting, especially for those senior associates who have been toiling away, waiting for BigLaw comp to bounce back.
Another question, which likely won’t be answered anytime soon: will firms increase associate base salary as well? Let’s not go crazy. In the meantime, hats off to Simpson, Paul Weiss, Milbank and Cleary for leading the pack.
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