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Citing the impossibility of “maintaining a boom-economy work force in a weak economy,” New York-based Shearman & Sterling is proceeding with plans that may result in about a 10 percent cutback in its associates over the next few months. In a memo circulated firmwide late Friday afternoon, senior partner David Heleniak explained that the 805-lawyer firm was forced to act by simultaneous drops in both activity levels and attorney attrition. In his memo, Heleniak wrote that the firm could not maintain its current staff level “in an economy in which many of our largest clients are letting people go by the thousands.” Although the firm would not specify the number of associates to be let go, managing partner Robert Treuhold said the firm expected to end the year with the same attrition rate as last year, about 20 percent, even though the number of attorneys leaving voluntarily has fallen by half. According to Treuhold, the firm will be “accelerating” its normal review process in the next few weeks to identify associates whose long-term prospects at the firm are not good. Those associates will be given three months’ notice and offered assistance in finding employment elsewhere. Treuhold noted that the capital markets and mergers and acquisitions departments had been hardest hit by drop-offs in business. but other departments will be trimmed as well. Associates at the firm say they were not surprised by the announcement, as rumors have been circulating for more than a week. One capital markets associate, who asked to remain anonymous, said he was disappointed in the way the firm let an atmosphere of uncertainty hang over the firm. “They should have addressed this a lot earlier,” he said. However, the cutbacks themselves, the associate said, were necessary medicine. “There are too many people,” he said, “too many laterals especially.” A junior associate, who also asked not to be named, agreed that the cuts may have been necessary, but faulted the firm for not being up-front with individual associates who were being let go. “They have to be clear about what they expect from people,” he said. But Treuhold said the firm itself had been caught unawares by the slumping economy. “I don’t think anyone could have foreseen the decline in the third and fourth quarters of this year,” he said. Moreover, Treuhold said the firm is making an effort to be clear about its reasons for letting associates go. Referring to the long discussion of the economic downturn in Heleniak’s memo, Treuhold said, “We’re probably the first major law firm to be honest about this.” Among New York’s top firms, Shearman & Sterling is the first to announce cutbacks on such a large scale. The firm did not lay off associates during the 1991-92 recession, and some associates are concerned that layoffs will hurt the firm’s prestige and its ability to attract top talent from law schools. Earlier this month, Philadelphia-based Morgan Lewis & Bockius announced that it was laying off about 50 associates. “The only firms that have laid people off are not firms that we think of as our peer firms,” the capital markets associate said. Treuhold said that he does not expect the firm to be hurt in its ability to attract people. “Our message is still strong and well-received on campuses,” he said. Treuhold pointed out that the firm is continuing to hire for its offices around the world and will finish the year with more lawyers than it had in January. Moreover, Treuhold suspects that Shearman will not be the last top law firm to face difficult decisions about staffing. “I would be very surprised if we were the only ones affected in this economy,” he said.

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