By Anna Snider
New York Law Journal
February 4, 2000

Associate salaries continue to skyrocket, with 19 firms so far adopting — and in some cases even exceeding — the staggering pay scale set by the California high-tech firm Gunderson Dettmer Stough Villeneuve Franklin & Hachigian.

The firm unwittingly set off what has become a bicoastal frenzy when it raised its associate starting salaries nearly 50 percent, to $145,000, last month.

For the most part, the raises in other firms are going to associates in Silicon Valley only, but the ripple effect is beginning to be felt in New York.

On Monday, Orrick, Herrington & Sutcliffe set a new standard when it announced that first-year associates in five of its offices, including New York, can earn as much as $160,000 in pay and bonuses, up from about $110,000 in 1999. Fourth-year associates start at $165,000, earning up to $220,000 with various bonuses.

Chairman Ralph Baxter told his charges they had earned it. "Your work is increasingly imaginative, expert and efficient," he said.

On Tuesday, Heller Ehrman White & McAuliffe, which has nine associates in New York, said their entry-level lawyers here can earn up to $150,000. Fourth-years will earn a base of $165,000, and can potentially reach $207,000 with bonuses.

And on Wednesday, Sullivan & Cromwell adopted base salaries of $125,000, $135,000, $150,000, $170,000, $190,000, $205,000, $220,000 and $235,000 for first- through eighth-years, respectively, sources in the firm said. Year-end bonuses not tied to billable hours are planned, they said.

These three firms join Brobeck, Phleger & Harrison, Morrison & Foerster and Davis Polk & Wardwell, which are also adhering to the new pay scale in New York.

When Gunderson Dettmer, which has 68 associates among its 90 lawyers, set these new levels in December, it could have remained out on its own, way above market, much as Wachtell, Lipton, Rosen & Katz is here in New York. (The firm for the past few years has been compensating associates at nearly twice the level of other elite firms).

Key Developments

But there were some key developments that set off the chain reaction. First, Cooley Godward matched Gunderson Dettmer, becoming the first of the big Silicon Valley firms to move. Next, Brobeck took the trend nationwide, adopting the higher salary levels in all of its offices, including New York.

And earlier this week, Davis Polk & Wardwell became the first major New York firm to meet the new standard.

These salary increases do not come cheaply for law firms. Unless firms raise their billing rates, these increases will come out of the partners' pockets. For a firm the size of 460-lawyer Davis Polk, raises of $25,000 per associate would cost each equity partner approximately $70,000.

Yet it seems inevitable that the trend will continue. "It's going to be hard for New York firms to pay less than West Coast firms," said Steven Franklin, a Gunderson Dettmer partner. Nonetheless, Mr. Franklin said his firm made the decision to boost salaries without a sense for how the market would react.

"We honestly weren't sure whether people would look at us and say, 'These guys are crazy,' or have different economics, or take at look at our size and say, 'They can hire whoever they want,'" Mr. Franklin said.

In setting the levels — for example, a guaranteed $145,000 for first-years and a guaranteed $195,000 for fourth-years — Gunderson Dettmer decided to go a notch higher than last year's base compensation, regular bonuses and "off balance sheet" bonuses, Mr. Franklin said. The firm, he said, wanted to make a statement to both its own lawyers and competitors that "this is where the interesting work is, this is where the incredible opportunities are."

The moves seems to be working for the firm, a four-year-old Brobeck spin-off, which has handled more than 90 IPOs, 780 venture and private financings, 300 joint ventures and 125 mergers, mostly for high-tech and emerging companies.

"We are absolutely getting a huge number of very interesting resumes from New York and other markets," Mr. Franklin said.

Despite the action on the part of other firms, Mr. Franklin said he believes Gunderson Dettmer's package, which requires no fixed number of billable hours, is unparalleled.

"We haven't seen anyone match yet," he said. "[At other firms], they can get there if they bill 2,400 hours, but that's not a match."

Associate Satisfaction

Not only does the firm pay well, but it also has a reputation for treating associates well. 

The firm's summer program took first place in its debut in The American Lawyer's Summer Associate Satisfaction Survey in 1997. Last year, when the magazine introduced a combined ranking for summer and mid-level associates, Gunderson Dettmer, whose relaxed ethos has earned has earned it the fraternity-inspired nickname "Gunder Delta," placed third nationally among mid-sized firms and first in Silicon Valley.

Gunderson Dettmer, which is based in Menlo Park but also has offices in the high-tech meccas of Austin, Texas, and Waltham, Mass., is seeking to add to its ranks.