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Digging in its heels on associate pay raises, Palo Alto, Calif.’s Wilson Sonsini Goodrich & Rosati announced last Friday that it won’t match San Francisco-based Brobeck, Phleger & Harrison’s $10,000 across-the-board bump. So far, the firm stands alone in the San Francisco Bay Area in its refusal to follow Brobeck’s new salary scheme that raises first-year base pay to $135,000. San Francisco’s Pillsbury Winthrop on Friday became the third firm to match Brobeck’s Jan. 12 pay hike, lining up behind Gray Cary Ware & Freidenrich and Perkins Coie’s Bay Area offices. Wilson’s holdout may signal to the firms still mum on the issue — like Palo Alto’s Cooley Godward and San Francisco’s Morrison & Foerster — that they now have an option of whether to hold firm on salaries or follow Brobeck’s lead, say recruiters, consultants and senior Silicon Valley lawyers at other firms. “It’s gotten a lot of jaws working around town, and it’s too soon to tell what the fallout will be,” said Robert Major Jr., principal at legal recruiter Major, Hagen & Africa in San Francisco. A lot of the talk, however, seems to focus more on the economy than on the fact that Bay Area firms logged record profits for 2000. Brobeck partners stand to take home $1.17 million in profits per partner, and Wilson partners are estimated to take home $925,000 each, according to an annual survey by The Recorder. But uncertainty over the coming year is having a lot of influence on the firm managers who set pay levels. “I think the market’s turned, and the demand for associates just isn’t what it was a year ago,” said Peter Zeughauser, a Newport Beach, Calif., law firm consultant who co-founded ClientFocus. Zeughauser added, however, that on the flip side, “if enough firms match it, it wouldn’t surprise me to see Wilson reconsider.” Like Brobeck, Pillsbury Winthrop bumped its first-year base by $10,000 up to $135,000. And also like Brobeck, the firm tied bonus levels to billables. At 2,100 hours, a Pillsbury first-year stands to get another $5,000; at 2,250 hours, bonus potential increases by $10,000; and at 2,400, first-years can add yet another $15,000. The firm also can award another $5,000 as a discretionary bonus. “We did have a very good year last year, and we’ve looked at our marketplace,” said Patrick Marshall, Pillsbury partner and chairman of the firm’s attorney development committee. By comparison, a Pillsbury fourth-year will draw $175,000 in base salary plus a discretionary bonus of up to $12,000. By billing 2,100, a fourth-year can pull down $11,000 more; at 2,250 hours, the fourth-year bonus can increase by another $15,000; and at 2,400 hours, the bonus potential swells another $19,000. Pillsbury’s raises apply to associates in its 12 domestic offices. The firm has about 470 associates overall, 338 of them coming from Pillsbury, Madison & Sutro, which merged Jan. 1 with New York-based Winthrop, Stimson, Putnam & Roberts. During the merger, the firm factored in the salary increases, and some associates from the former Winthrop will see a significant bump, Marshall said. Wilson, meanwhile, held its base pay at 2000 levels, meaning first-years pull down $125,000; fourth-years earn $165,000; and seventh-years are paid $205,000, according to Donna Petkanics, Wilson’s managing director of operations. Year-end target bonuses remain the same as well. First-years stand to pull down an additional $20,000, fourth-years another $37,000 and seventh-years an extra $42,000, Petkanics said. “We evaluated what our total compensation package is, and we do think it’s competitive in the marketplace when you look at all the pieces together,” said Petkanics. Wilson also kicked in another $1.5 million into the bonus pool that associates will share when the firm’s fiscal 2000 ends Jan. 31, Petkanics said. To round out the package, the firm also pays quarterly productivity bonuses and gives a cut of its plum equity fund to associates. The firm is also planning to allow associates to make direct personal investment into the fund, as do partners. The reaction was mixed among Wilson’s 625 associates. Some complained firm managers were tightfisted in the wake of record profits. Others shrugged it off. “A thousand here, a thousand there doesn’t kill it,” said one senior associate. “The end of the world comes” when other firms pay $15,000 or $20,000 more. Added another Wilson associate: “I still think I’m overpaid.” From a recruiting perspective, it’s uncertain how much difference $10,000 in base pay makes, particularly as the stock market continues to sag. Some associates fear a pay raise can add uncertainty to the firm’s bottom line, said Major. “Meeting the market is not going to send a particular message, or at least the [firm] spinmeisters are going to be able to spin it as a positive that their associates would rather have an economically stable law firm,” Major said. Salaries have already gotten so high that third-year law school students are focusing on other issues, said Mark Weber, the director of career services at Harvard Law School. “Five thousand is really not going to sway anybody,” said Weber. “They’re looking for interesting work and working at a place that provides an excellent springboard to another kind of opportunity.”

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