Font Size: 
Blank Rome to Cut Associate Compensation by $15,000
The Legal Intelligencer
July 06, 2009
D-BASE, Getty Images
And the cuts continue.
Blank Rome became the latest firm to put the squeeze on associate salaries, with much of the focus on more junior associates.
The firm brought down starting salaries from $145,000 in Philadelphia and Princeton, N.J., to $130,000; from $150,000 in Washington, D.C., and Wilmington, Del., to $135,000; and from $160,000 in New York to $145,000.
Other associate classes will face between a 2 percent and 10 percent reduction in pay, with more senior associates receiving a lower reduction in recognition of their contributions to the firm, Blank Rome said in a statement. The cuts are effective July 17.
"This is a market adjustment," the firm said in the statement. "The firm remains in strong financial health, and is on budget for this year. We are confident that our actions are in line with evolving market conditions among our competition, and, more importantly, with the expectations of our clients."
Blank Rome's decision to cut pay follows a string of local firms that have changed compensation models in a variety of ways.
Schnader Harrison Segal & Lewis; Buchanan Ingersoll & Rooney; Ballard Spahr Andrews & Ingersoll; Montgomery McCracken Walker & Rhoads; Drinker Biddle & Reath; Reed Smith; and DLA Piper have already adjusted compensation in some way this year.
Bob Tolan, national credit manager for the legal specialty group at Wells Fargo, said associate salaries are typically being cut because of productivity levels rather than any serious financial trouble. This recession is being used as a vehicle for a market correction, he said. But there is only so much firms can do to manage expenses. When firms start to look at equity and non-equity partner pay, he said, they are making a decision that the revenue line isn't going to move, so additional expense cuts need to be made.
Several firms have gone beyond just reducing salaries for associates. Schnader Harrison, Buchanan Ingersoll and Reed Smith have said that attorneys at all levels are affected in some way. Ballard Spahr did away with income partners, making all partners equity partners. Dechert has said that more than 30 of its top-paid partners have agreed to take a pay cut, with firm Chairman Barton J. Winokur taking a $1 million reduction in compensation. But the difference when equity partners take pay cuts is that they have the chance to recoup that money at the end of the year if profits are there.
NO END IN SIGHT
New York recruiter Jerome Kowalski is working with several firms on their associate compensation models as they look to adjust pay and create additional career tracks for non-partner associates.
What's happening in the market now is the reverse of what happened in the late 1970s when Cravath Swaine & Moore upped its compensation to $20,000 and every other major firm "followed like lemmings to the sea," Kowalski said.
Now firms are following those that have slashed salaries, he said.
"Rather than having a comprehensive strategic plan in place to rationalize the entire professional staff compensation structure, it's as if most of the law firms, most of the law firm leadership, are sitting in fox holes, every once in a while sticking their head up out of the fox hole and taking a shot," Kowalski said.
The first shot was attorney layoffs, he said. When that wasn't enough, firms did a second round of layoffs. And now with fewer associates, but still low productivity, the firms are looking to make changes to compensation, he said.
All of the firms mentioned above, with the possible exception of Montgomery McCracken, have laid off staff or associates and many deferred start dates for incoming associates.
"My guess is as the water reaches its natural level, the natural level for first-year [associate salaries] will probably be at about the $110,000 level," Kowalski said, adding that he doubted it would exceed $120,000.
With that being said, Kowalski said there will still be an elite group of institutional firms with high profitability that will be able to maintain salaries around $160,000 and continue to attract the top talent.
Along with many firms cutting compensation, Kowalski said he expects to see a continuing focus on the training programs for first-years -- like the one set up by Drinker Biddle -- and on the creation of different tiers for associates not looking to make partner.
