Mo' Money, Mo' Problems
As commenter Mike points out, Simpson Thatcher in NY went to $160,000. It looks like they're keeping their West Coast salaries to $135/145. The latest numbers I have are that the big westcoasters like MoFo, Latham, Gibson, OMM, and Orrick are at $135 (Quinn and Irell being the outliers on the high end at $145). My hunch is that by the time we start, all major markets except NY will be at $145. Put those vacation plans on hold once you start though.
UPDATE: S&C, Cravath, Cleary, Millbank have all so far matched. There are others speculating that the WC will raise to $145 to prevent it from going any higher.
UPDATE II: Moving to the top in light of comments and updates. Add Quinn (across the board), Fried Frank (NY and DC), Dewey Ballantine (does anyone else think of trading places whenever they hear this firm's name?), Willkie Farr & Gallagher, and Shearman.
UPDATE III: Crap, just what I was afraid of. MoFo has increased salaries ONLY in their NY office. While OMM is increasing LA and DC to $145 just as I predicted. $20 that all the WC firms follow the lead and do the same. I've been thinking about it a bit more, and generally the WC billable requirement is 1950. With any increase, that's going to go up to 2000, if not 2100. One way or another, the firms' bottom lines should not take any hit.
UPDATE: S&C, Cravath, Cleary, Millbank have all so far matched. There are others speculating that the WC will raise to $145 to prevent it from going any higher.
UPDATE II: Moving to the top in light of comments and updates. Add Quinn (across the board), Fried Frank (NY and DC), Dewey Ballantine (does anyone else think of trading places whenever they hear this firm's name?), Willkie Farr & Gallagher, and Shearman.
UPDATE III: Crap, just what I was afraid of. MoFo has increased salaries ONLY in their NY office. While OMM is increasing LA and DC to $145 just as I predicted. $20 that all the WC firms follow the lead and do the same. I've been thinking about it a bit more, and generally the WC billable requirement is 1950. With any increase, that's going to go up to 2000, if not 2100. One way or another, the firms' bottom lines should not take any hit.
Labels: Legal Culture, Legal Education Costs, OCIP/Employment
posted by Armen Adzhemyan at 12:55 PM
29 Comments:
$290K top associate salary.
Simpson in Cal. has been $145K.
And all offices at Simpson are usually treated the same, so I'd expect Silicon Valley and LA new associates also will receive $160K.
I think that all NY firms with SV/SF offices pay the same in the two offices.
That is a lot of money! I wonder if the new associates will pay it back through even more hours. For that reason, I am not sure if I want my firm to match.
I hear Skadden went to 160K in all domestic offices.
Come on Skadden, daddy needs a new pair of shoes.
I'd love to see an alum give his Meta Explanation of Law Firm Salary Raises here.
Where's John Steele when you need him? :)
EW as well as PG over at de novo both speculate that competition from the financial services industry plays a part in motivating these raises. If this is true, it suggests something interesting, which is that (in firms which draw this distinction) litigation associates may be receiving a cross-subsidy due to the firms' efforts to retain corporate associates. Litigation associates may have plentiful exit options, but those options are not as highly paid as the slots in iBanking, VC, private equity, etc. that many corporate associates covet. Can anyone comment on the respective turnover rates/average tenure of associates in corporate as opposed to litigation practice areas?
In the (NYC) firm where I worked last summer, there was a dearth of corporate associates at years three and above. It was very clear that the firm was struggling to retain these people.
12:09's comment got me thinking: why don't firms keep 1st year salaries lower and wait until their 2nd or 3rd year to raise their salaries astronomically? That way they'd give people a huge incentive to stay on board longer.
re: "I thought it called for smart peole who can pull 24-hour shifts." My strong impression is that finance differs from law in this regard (which is one of the reason it pays more). Obviously I'm in no position to speak authoritatively on this subject, but I believe that when, say, JPMorgan is considering hiring a young lawyer to work in iBanking, they want someone who has already seen deals come together, conducted negotiations, worked with the SEC/DOJ/FTC on mergers, IPOs, or whatever, and generally developed actual expertise in complex financial transactions. Litigators (even those who exclusively serve the finance industry) work on far fewer matters, so it's harder to develop a sense of how these things work. ALso, as a litigator you typically only focus on the parts of a deal that didn't work out, so you may never get a comprehensive sense of a deal's life-cycle.
I say all this with a twinge of regret: I'm going to do litigation exclusively, and I was envious of the fact that my corporate summer-associate peers got to see multiple deals go from inception to completion over the course of the summer--the pace of litigation, needless to say, is glacial by comparison.
All that being said, I agree with EW that the large difference in salaries between finance and law is a strong argument against the theory that law firms are trying to compete on price terms for these people.
The basic principle behind the increasing pay is supply and demand. The number of top-14 or top-25 grads who did reasonably well is barely increasing over time, while the number of biglaw firms chasing those grads has grown quite significantly over the last 20 years. (I forget the precise stats, but it's something like AmLaw 200 formerly accounted for 4% of the legal profession but now accounts for 10%.) Over the next decade, we should expect supply to remain nearly constant and demand to continue to grow.
A more detailed analysis of the market would look at what drives biglaw firms to hire from that pool (a mix of norms, history, psychology, and rational economics), and the mechanisms that keep supply constant (the ABA accreditation process, the regulated legal profession "monopoly," and the reigning ranking process for law schools), and other factors.
If you're really interested in this stuff, you might read William Henderson's (Indiana) articles. Here's the abstract of his recent piece with David Zaring:
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=958053
"Two recent novels portray the substantively uphappy and morally unfulfilling lives of young associates who work long hours in large, elite law firms. As it turns out, their search for love, happiness, and moral purpose is largely in vain. In the rarefied atmosphere of both fictitious firms, the best and the brightest while away their best years doing document reviews, drafting due diligence memoranda that no one will read, and otherwise presiding over legal matters with lots of zeros but precious little intrinsic interest. If this is what large law firm practice is like, the reader is bound to ask why large law firm jobs are so coveted. Is it really all about money?
"In this review essay, we compare Kermit Roosevelt's and Nick Laird's bleak portrayals with findings from a unique dataset on law firm profitability, prestige, hours worked, and various measures of several associate satisfactions. We also mine the findings of several empirical studies that track the experience of lawyers over time. We observe that higher firm profitability is associated with higher salaries, bonuses, and prestige. Yet, higher profits also have a statistically significant relationship with longer hours, a less family-friendly workplace, less interesting work, less opportunity to work with partners, less associate training, less communication regarding partnership, and a higher reported likelihood of leaving the firm within the next two years. Nonetheless, graduates from the nation's most elite law schools tend to gravitate toward the most profitable and prestigious (and most grueling) law firms. The attraction of the most elite firms may be superior outplacement options. Or perhaps, as both novels intimate, it may stem from a reluctance to make hard life choices.
"The available empirical evidence suggests that success within the elite law firm environment often entails a difficult array of personal and professional trade-offs. Although we find our empirical data to be informative, the novel may be a particularly effective vehicle for examining the rather existential nature of these choices. Thus, we suspect that the accounts drawn by Roosevelt and Laird will resonate with many elite, large law firm lawyers."
My base salary for a London office is 145. I am assuming it was pegged to NYC. Should I be expecting a raise too or are you Yanks the only privileged ones?
As another commenter on another blog points out, 125k (2000) at 3% growth per year = 154k (2007). THus, salaries have not grown much at all, and PPP at many big firms have grown at a much faster rate.
Any word yet from mofo?
Interesting abstract posted by Mr. Steele. Anybody expect to be happy? Anybody think the majority of associates working at the firms were happy?
Any economists want to jump in and talk about market failures? But, I guess this maybe gets into the realm of cultural anthropology. I mean are we lemmings? Or are we doing the rational thing? Or are we being irrational because of our risk averse lawyer personalities?
Professor Steele,
If it is really all about "supply and demand," then why do hours keep going up with salaries? If it were really a seller's market for Boalt-level JDs, why couldn't first-year associates command more money for the same hours? I don't mean to criticize and I know it is always easy to say "supply and demand" but it seems that is often overly simplistic (as is the case here).
Skadden. $160K. All offices. Minimum billables for full bonus = 1600. All pro bono hours count toward bonus.
For those comparing Cal. based firms with their NY counterparts (STB, Weil, Skadden, DPW, S&C), don't believe the hype about the difference in hours. The firms can pay more because their hourly rates are substantially higher. They're not lifestyle firms, but how can you really throw away an extra $50K/year in total comp (WC firms have bonuses tied to hours, which are smaller even for insane billers).
Oh wow, Skadden only requires 1600 minimum billable hours for full bonus? I guess I had better take that at face value.
Using the formula below, currently the difference in total compensation between STB and a prominent SV-based firm ranges from $40k at first year to $75k at more senior levels:
Comp differential = [(NY salary + NY bonus) - (CA salary + CA bonus)]
Year 1: $40k = [(160k + 35k) - (135k + 20k)]
Year 2: $45k = [(170k + 40k) - (145k + 20k)]
Year 3: $52.5k = [(185k + 45k) - (155k + 22.5k)]
Year 4: $65k = [(210k + 50k) - (170k + 25k)]
Year 5: $65k = [(230k + 55k) - (185k + 35k)]
Year 6: $70k = [(250k + 60k) - (200k + 40k)]
Year 7: $75k = [(265k + 65k) - (210k + 45k)]
Year 8: $75k = [(280k + 65k) - (220k + 50k)]
The difference in total compensation over 8 years at a law firm would be almost a half million dollars.
http://www.infirmation.com/bboard/clubs-fetch-msg.tcl?msg_id=0036Ap
Quinn just raised to $160K for all offices, with summer associates getting $3,080/wk. Hot diggity!
S&C always gives raises firm-wide, and not only did they match compensation for juniors, they re-raised STB for senior associates.
Dewey Ballantine 160K all offices including the UK....check out the memo at www.abovethelaw.com
Clifford Chance all US offices 160K......
Anyone attend the John Yoo/Bob Barr debate? Any zingers worthy of the blog?
Barr on his Borat cameo: "A few minutes in, I realized something was amiss. We ended up sending them out of the office...but it was too late."
Rumor on Greedy Associates is that MoFo is going to $145 in non-New York markets. This is supposedly a copy of the memo. Can any folks working at MoFo confirm?
Confirmed. MoFo going to $145.
Post a Comment
<< Home