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Law firm associate bonuses generally were flat in 2006 compared with the year before, but with business brisk and law firms scrambling to attract and keep good associate help, the question is: “Why?” Several top firms across the country matched bonus amounts for 2005, which at many firms went up to $65,000 for senior associates. And while few would argue that those year-end perks were on the skimpy side, the absence of an increase comes at a time when many shops are claiming that business is better than ever. The decision by law firms to stay the course was due in part to a raise in associate pay in late 2005, which brought first-year salaries in New York to $145,000. But other factors may have contributed to static bonus amounts in 2006, including a decision to keep profits in partners’ pockets and an attempt to offset client perceptions that firms are operating with an excess of riches. “Law firms are beginning, quite rightly, to be a little uncomfortable with their profits in view of their increasing scrutiny from clients,” said Joel Henning, a consultant with Hildebrandt International, a law firm consultancy. N.Y. leads the pack In their usual follow-the-leader style, law firms in New York began disclosing year-end bonus amounts in December. Milbank, Tweed, Hadley & McCloy revealed in mid-December that it was paying bonuses ranging from $30,000 for first-year associates to $65,000 for senior associates, the same amount as in 2005. Quickly following the lead was Cadwalader, Wickersham & Taft, disclosing the same range. A few days later, Cravath, Swaine & Moore said that its bonuses would fall between $30,000 for new associates and $60,000 for senior associates. Sullivan & Cromwell, in the past the first to announce its bonuses, disclosed a few days after Milbank that its amounts started at $30,000. It did not indicate the top figure for senior associates. Paul, Weiss, Rifkind, Wharton & Garrison at that time said that its bonuses would range between $30,000 and $65,000. Those bonuses were on top of base pay raises of about $20,000 across the board for associates at many big firms. As a result, first-year associates stood to make $175,000 in 2006. Bonuses elsewhere also fell in line with 2005. DLA Piper’s, for example, ranged from $35,000 to $65,000 for New York associates who billed 2,000 to 2,299 hours. Senior associates in New York who billed more than 2,500 hours could earn up to $92,500. Bonuses for associates in non-New York offices ranged from $20,000 for first-year associates who billed between 2,000 and 2,100 hours, and up to $92,500 for senior associates who billed more than 2,500 hours. Bryan Cave, with its largest office in St. Louis, said that its bonuses were comparable to those in 2005. Junior-level associates were eligible to receive up to $25,000, while bonuses for senior associates were up to $85,000. Salaries for first-year associates started anywhere from $95,000 to $145,000, depending on the city. Although bonus amounts in 2005 for Los Angeles-based Gibson Dunn & Crutcher were not disclosed, the firm in 2006 doled out up to $35,000 for New York first-year associates and $27,500 to first-year associates elsewhere. The 833-attorney firm also raised its first-year salaries last year to $145,000 in New York and $135,000 in other offices. Morrison & Foerster’s bonuses were on par with 2005. Associates at the 1,062-attorney firm received anywhere from $30,000 to $65,000 in year-end awards. Houston-based Vinson & Elkins kept its bonuses the same as in 2005. In its New York office, which has 45 attorneys, associate bonuses went as high as $65,000. The 759-attorney firm also raised salaries to $145,000 in New York and to lower levels elsewhere. Vinson & Elkins managing partner Joe Dilg said that although the firm does not make major announcements about increases in salaries and bonuses, it has to keep pace. “Our clients expect us to have the highest quality, and they know it takes a competitive compensation,” he said, adding that he expects the firm’s 2006 performance to be about 10% higher than in 2005. Determining bonus amounts requires a delicate balancing act, said Ward Bower, principal of Altman Weil, a law firm consultancy. “You’ve got to make everybody happy,” he said. At the same time, however, law firms are keenly focused on keeping their profits-per-partner numbers high, which affects the associate bonus column, he said. A competing factor is the availability of talented associates. Bower estimates that the average class size of “AmLaw 200″ law firms has increased to 50 new associates. The AmLaw 200 is a ranking of the nation’s top law firms based on revenue by The American Lawyer, an NLJ affiliate. With law schools continuing to graduate roughly 40,000 students year after year, recruiting and retaining talented associates has grown ever more cutthroat, Bower said. At the same time, attrition has reached record levels, with some 78% of associates leaving by their fifth year of practice, according to NALP, formerly known as the National Association for Law Placement. “They have to find a way to afford a competitive advantage over other firms,” Bower said. In general, law firms are starting to be less forthcoming to those outside the firm concerning bonus details, said Hildebrandt’s Henning. Firms want to know what the competition is doing, but creating the impression that they have hordes of cash to distribute to their associates may not sit well with clients. They also want to avoid any appearances of antitrust violations. In addition, he said that law firms more than ever are basing bonuses on merit rather than strictly on seniority. Small firms make a move As the big firms tweak their bonus programs to reflect hard work, smaller firms are making changes of their own. McAfee & Taft, a 125-attorney firm in Oklahoma City, in the past handed out associate bonuses near year’s end, said managing director John Hermes. But the task, which had to be completed in conjunction with decisions about partner compensation, became too cumbersome, he said. “We needed a rest.” Now the firm gives out associate bonuses in June. Last year, the merit-based perks ranged from $10,000 to $12,000. Salaries start at $90,000, a figure that Hermes said the firm is in the process of reviewing due to competition in the region. “Texas has done it to us again,” he said. At least one firm has elected to do away with formal bonuses. Nashville’s Bass Berry & Sims, with 194 attorneys, decided last year to raise starting salaries to $100,000. The firm has abandoned a rigid bonus program, but it still will give some attorneys a perk of up to 10% of base pay. “We ended up giving a small bonus,” said Eleanor Smith, director of business development. “We had a good year.”

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