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Eighteen months ago, the sky was the limit when it came to associate salaries. Now, rank-and-file lawyers are just happy with a steady paycheck. In the last several weeks, San Francisco Bay Area associates have been hit with a steady stream of bad salary news. First Gunderson Dettmer Stough Villeneuve Franklin & Hachigian said it could no longer guarantee associates their annual year-end bonus. Then, Wilson Sonsini Goodrich & Rosati told its associates not to expect much in the way of bonuses this year. And last week, Gray Cary Ware & Freidenrich froze associates at their current salary levels for six months. The firm’s associates won’t advance to their next lock-step until July at least. It’s enough to make a Greedy Associate cry — and it doesn’t look like they’ll be wiping away those tears any time soon. The economic downturn that is battering most of the region’s big law firms has pretty much eradicated talk of raises and big bonuses that were de rigueura year or so ago. Consider the muted reaction to Gray Cary’s plan. A few associates whined that it felt like a pay cut, but for the most part, associates said they were just relieved the firm promised them they wouldn’t be laid off this year. Look for most of the region’s top firms to do something similar come January. They may not freeze associates in their current class, but they won’t likely be handing out a raise. “We’ll see a bunch of announcements that [firms] aren’t going to raise salaries,” said one senior Silicon Valley partner who spoke on the condition of anonymity. He even went so far to suggest that reducing associate salaries “isn’t out of the question.” That’s a stunning turnaround from just 18 months ago when Gunderson launched a nationwide associate salary race. The firm hiked annual first-year base pay to $125,000 and guaranteed a year-end bonus of $20,000. Most Bay Area firms followed suit, and New York heavies — accustomed to setting the salary agenda — were forced to fall in line. And early in 2001, despite a waning economy, a few Bay Area firms raised salaries again. Brobeck, Phleger & Harrison hiked first-year base pay to $135,000. Gray Cary, Perkins Coie’s Bay Area office and Pillsbury Winthrop matched. Firms felt the raises were necessary to stay competitive in the overheated market for talent. And, at the time, the added expense of moving first-years from $95,000 to $125,000 or more was worth the huge bite into profits. Though they’re shedding unproductive employees and cutting costs to continue to pay salaries, some firm managers still put a positive spin on the increases. For Pillsbury Winthrop, which had just completed a bicoastal merger, making room in the budget for the raises forced the firm to operate more efficiently, said Marina Park, firmwide managing partner. And Brobeck Chairman Tower Snow Jr. said he has no regrets about trying to touch off a repeat of the 2000 salary war in 2001. “We knocked the cover off the ball in 2000, and we did it with a lot of hard work from our associates, and they deserve to share the fruits of our success,” Snow said. That goes both ways though. Snow isn’t saying whether the firm will try to grab the spotlight next year with the same kind of salary move. But he’s upbeat about the economy and predicts the coming months will pick up. “What we do will be driven by what’s going on with the financial markets,” Snow said. And Gray Cary played its raise card when it announced it was going to freeze everyone’s pay in January and not make any decisions about raises until the following June. Margaret Kavalaris, a Gray Cary partner, defended the firm’s decision to delay raises, saying it already pays at the top of the market. Even as the firm looks to freeze spending on salaries, the firm managers express no regrets they matched Brobeck. “We’re seeing high-quality resumes so in terms of building a talent base that you can be proud of, our compensation system serves us well,” said J. Terence O’Malley, Gray Cary’s chairman. For associates, the money would be nice — but having a job is nicer. At Cooley Godward, where 86 associates lost their jobs last month, no one’s clamoring for the kind of raises that occurred during the salary spike of 2000. Cooley first-years make $125,000 a year in base pay. And one Cooley first-year who spoke on condition of anonymity said he definitely was not expecting a raise in January: “Is anyone expecting one? I wouldn’t imagine so, certainly not in this market.” Related Chart: Firms Stay the Course

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