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Brobeck, Phleger & Harrison fired the first shot in what could become another salary war by raising first-year pay to as high as $170,000. But it is still unclear whether Brobeck’s action will lead to a full-scale battle or merely a salary skirmish. Within hours of Brobeck making its announcement, Gray Cary Ware & Freidenrich announced it would match Brobeck’s increase across the board. And Seattle’s Perkins Coie, not to be shut out of the Silicon Valley high-tech market, raised its associate salaries as well for its San Francisco Bay Area offices. But other firms say they re still mulling salary increases for the coming year. The question for associates at those firms: Will they match? Brobeck bumped base salaries up by $10,000 firmwide for its associates, bringing first-years to $135,000, fourth-years to $175,000 and seventh-years to $215,000. Associates don’t face a minimum billable requirement for the base, but they do if they want to reach four different bonus levels. First-years billing 1,950 hours will earn a discretionary $5,000 bonus, but associates logging 2,400 hours will pull down a $35,000 bonus. Seventh-years draw down $60,000 for billing 2,400. The move comes at a curious time. The Bay Area’s top-grossing firms scored record revenues and profits in 2000, but the economy has cooled and firms are grappling with how that will affect them and their fattened associate ranks. Brobeck chairman Tower Snow Jr. said the firm was undeterred by concerns over the economy when it set the new salaries. “We don’t know what the future brings. What we do know is we had a very successful year, and we have always told our people that everyone will share our success,” Snow said. At Brobeck, which logged $467 million in revenue, partners are poised to pull down an average profit of $1.17 million. Snow said the firm will absorb the associate salary increases by cutting attrition, not by raising rates for clients. He estimates that each associate departure costs the firm $200,000 in recruiting and training. The move surprised many Silicon Valley players. Gunderson Dettmer Stough Villeneuve Franklin & Hachigian, which touched off the wave of steep associate raises in 2000, won’t consider the issue until later this month. Wilson Sonsini Goodrich & Rosati is still considering associate salaries as well and did not immediately match Brobeck on Friday. Pillsbury Winthrop, formerly Pillsbury Madison & Sutro, also plans to take up the issue shortly. Meanwhile, Thelen Reid & Priest made no commitments. “We always are watching the marketplace, and we evaluate any changes. What we do or won’t do will be based on what’s best for our clients and our situation, which is that of a full-service firm,” said spokesman Jim Bonde. Thelen was one of the last of the Bay Area’s biggest firms to announce it would match the market rate a year ago. It took the firm about three weeks. Other firms also said they were not ready to make a decision. “We’re reviewing the matter as we always do, and certainly intend to remain competitive,” said McCutchen, Doyle, Brown & Enersen managing partner Michael Plishner. Silicon Valley law firm watchers are uncertain whether every firm will line up behind Brobeck. “This will further divide firms into tiers,” said Robert Major Jr., a principal at lawyer recruiting firm Major, Hagen & Africa. On one level will be smaller firms or those that haven’t yet penetrated the tech industry, Major said. On another level will be the firms “that are the highest paying, the most profitable and have a reputation for drawing individuals who at least in part are motivated by compensation.” Law firm consultant Larry Watanabe said many small- and mid-size law firms are still reeling from the last round of raises. “The widening salary gap is making it difficult for them to survive,” Watanabe said. The squeeze is particularly acute in Northern California, where operating costs are increasing, Watanabe added. And it’s unclear how the new salary levels will affect the competition between New York and Silicon Valley firms for the top slot on the salary front. The salary levels set by Gunderson in December 1999 propelled Silicon Valley firms ahead of the traditionally higher-paying New York firms. Last fall, however, New Yorkers took the lead. Led by Weil, Gotshal & Manges, the biggest New York firms bumped salaries last fall. Weil announced in November it would pay first-years a $40,000 bonus, raising first-year pay to $165,000. Many New York firms followed suit. Weil Gotshal’s Matthew Powers was undeterred by Brobeck’s attempt to best his firm’s effort to take the salary lead. He further criticized Brobeck’s bonus plan because it encouraged billing. “Every law firm has people who are working too hard, that’s something to minimize, not incentivize,” Powers said. “We don’t want to reward the people who are sitting there and literally killing themselves billing 2,400 hours.” Weil Gotshal, Powers said, doesn’t enforce minimum billables and paid each of its first-year associates the full $165,000 regardless of hours billed. The average billable totals by Weil associates last year were below 2,000 hours, Power said. Whether higher, hours-based bonuses would propel associates to log ever-increasing numbers of hours was a question raised in the wake of last year’s round of salary hikes. Snow said Brobeck is in the process of determining bonus awards for 2000 and could not yet say how many of its associates had earned the maximum bonuses. The firm’s average associate billable hours last year, however, were 1,933, Snow said, well below what management had expected. “They want a balanced life,” Snow said. “A smaller segment of the population is motivated by the bonuses.”

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