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A first-year salary of $200,000? Not quite yet, but with word that Williams & Connolly is raising pay for starting associates to $180,000 a year, the magic 200K mark is now certainly within shouting distance. The new salary will put the firm’s first-years about $20,000 above the market rate for most major U.S. firms, with a $15,000 to $25,000 boost for its other associate classes. Firm managers and legal recruiters contacted last week doubted many players would rush to match. Williams & Connolly, they say, is an anomaly because of its small size, tight litigation focus, and reputation for being one of the most selective firms in the country when it comes to hiring (“above the fray,” as one recruiter puts it). Plus, the firm has traditionally been above D.C. market salaries because it doesn’t give end-of-year bonuses to its associates. Perhaps other firms won’t fall into line — at least not right away. But many in the legal community have been hearing that salaries are going to rise again, and in a big way. How long, even in an economy that seems to be headed toward recession, before a big firm, probably in New York, pulls the trigger on a $200,000 payday? “These salary wars are like the game of chicken, and it would not surprise me if select New York-based firms upped the ante by raising starting salaries to over $200,000,” says Dan Binstock, a legal recruiter with BCG Attorney Search. Says Ward Bower, a law firm consultant with Altman Weil: “I think it would be more of a problem if it were a bigger firm in New York. But the fact that that trumps the New York salaries indicates to me that top firms in New York are going to turn around and not only match it but beat it.” If that happens, recruiters and partners say, many firms will finally be forced to surrender in the salary battle. Associates at elite firms with a big New York presence and a base of Wall Street clients (or highly profitable specialty firms like Williams & Connolly) will simply earn more than lawyers in other markets. “Game over, at least in D.C.,” Binstock says. Clients, not to mention rank-and-file partners and senior associates, may not take kindly to an even higher mark for associate pay. But they adjusted to the $1,000-an-hour partner and the billion-dollar law firm — both of which seemed like pipe dreams back in the day. They may soon have to cope with the reality of a $200,000 first-year. WHAT ABOUT THE BONUS? This isn’t the first time Williams & Connolly has led the market with salary increases. In 1988, the firm raised salaries for first-years to the now-quaint level of $70,000 from $60,000, which caused D.C. firms to sit up and take notice. At that time, few firms had year-end bonuses, so the hit was far more palpable. The firm also initiated a race in 1996 when it raised salaries from $77,500 to $81,000, and again in 2002 from $130,000 to $140,000. And when Simpson Thacher & Bartlett raised in January, shooting associate salaries up to $160,000, D.C. firms at first answered by going up to $145,000. Williams & Connolly, however, went to $165,000 in early spring. Almost all of the firms on the D.C. 20, such as Hogan & Hartson, Wiley Rein, and Arnold & Porter, have now matched New York’s salary hike and are paying first-years $160,000 plus an end-of-year bonus. Williams & Connolly doesn’t have a bonus system. Without a raise in base pay, the firm’s associates would be making substantially less than their friends at other firms who could earn $20,000 or more in year-end bonuses. Several managing partners in D.C. have called the raise a “nonevent” for just that reason. (Williams & Connolly partners declined to comment for this article.) “It’s a good party line if [D.C. firms] want to talk their way around it, and maybe they will be able to,” says Peter Zeughauser, a legal consultant with the Zeughauser Group, of the “but what about the bonus?” argument. However, “everybody’s been anticipating and dreading this move, and frankly, most people thought it would go to $200,000.” Adding to the issue, bonuses are subjective critters, often tied to billable-hour requirements and merit, which means that some associates won’t make the cut. And according to recruiters and consultants, incoming associates look at base salary more than bonuses when considering which firm to join. SLUGGISH ECONOMY Even if Williams & Connolly is different, the move could put pressure on other firms. After all, a small firm with a focused practice can have a big impact. Just look at the salary wars of 1999-2000, when Silicon Valley corporate boutique Gunderson Dettmer Stough Villeneuve Franklin & Hachigian broke the sound barrier by raising salaries for first-year associates to $125,000 plus a guaranteed bonus. That, of course, was during the roaring days of the dot-com era. This time, though, the economy doesn’t have hot startup companies lifting it into the stratosphere. Instead, the forecast is sluggish, with a possible recession looming over 2008. For the moment, the bottom has dropped out of structured-finance and private equity practices, and deal-making has slowed. Firms may not begin to feel the full financial effects until well into next year, but when they do, higher associate salaries are going to sting. And many firms, even those in New York, might not be keen on another boost in associate pay with an economic downturn in the works. “I think more and more firms have to take a real hard look at their economics, and not just match market,” says Michael Short, a legal consultant with Hildebrandt International. “They actually have to do something that fits for what they’re doing.” That said, the first shots in the current salary fight were fired in New York, and it’s debatable as to how long firms there will be able to ignore Williams & Connolly’s raise. New York might eventually have to come around. One consultant mentioned that Manhattan firms were having difficulty keeping associates on the island. After all, if the salary is the same everywhere, why not live in a place where a closet doesn’t cost $2,500 a month in rent? CRANKY CLIENTS If New York were to go up to $200,000, the raise would set the stage for a two-tiered system where a happy few would perch high above the rest. Some firms “are going to decide, �Well, you know, we’re not going to play in that game. We’re going to play in the major leagues, but we’re not going to pay the Yankees’ salary,’” says Altman Weil’s Bower. But there is always the fear among firms that if they don’t raise salaries, recruiting will falter. Top law students may simply look for the largest paycheck. Even Williams & Connolly felt the pressure on this one. In 1994, the firm finally instituted a clerkship bonus, but only after losing out on much-coveted Supreme Court clerks for three years in a row. Then again, recruiting and firm image won’t mean much if firms can’t pay the light bill on time. Even more pressing is the issue of a client revolt. If firms raise the rates too much to pay for exorbitant associate salaries, then clients might start exploring other, less costly options. According to Susan Hackett, the senior vice president and general counsel of the Association of Corporate Counsel, many clients see the salary war as having reached an insane level and feel that the value-to-cost ratio of new associates is edging on untenable. And if clients are unhappy, here’s betting that firms won’t have to think too hard about bypassing a $200,000 associate payday.
Attila Berry can be contacted at [email protected]. Editorial assistant Marisa McQuilken contributed to this article.

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