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After an era of fizzle and pop, associate salaries in 2002 have been flatter than a can of soda left on a desktop overnight. For the second year in a row, most of the San Francisco Bay Area’s top-grossing firms have left salaries at the levels set during the height of the technology boom, and a few firms have even trimmed associate base pay or tinkered with bonus structures to save a little money. (See related chart: Associate Salary Survey 2002.) While many associates aren’t thrilled with the salary situation, they say that given the dismal market it’s understandable. “I haven’t spoken to one associate who was expecting an overall increase in salary structure,” said Samuel Weiner, chair of Latham & Watkins’ associate committee. Indeed, a number of associates feel lucky to have a job. This year, San Francisco’s Brobeck, Phleger & Harrison and Gray Cary Ware & Freidenrich laid off associates, and Palo Alto, Calif.-based Wilson Sonsini Goodrich & Rosati said last month that it plans to do so. Brobeck and Gray Cary also are paying incoming first-years to come later than scheduled or stay away entirely. The turmoil began last year when several firms, beginning with Palo Alto-based Cooley Godward, axed dozens of their associates. While layoffs have been limited in 2002, firms have continued to trim their ranks through stricter performance reviews. For small and mid-size firms the end of the salary wars is a welcome relief. With the exception of Menlo Park, Calif.’s Gunderson Dettmer Stough Villeneuve Franklin & Hachigian — which led the way in boosting first-year salaries to $125,000 from the local market high of $96,000 — and Menlo Park’s Venture Law Group, most of the smaller firms didn’t ratchet their salaries quite as high. But they felt the crunch with the raises they did dole out. After Gunderson raised associate salaries, “large or wealthy firms did the same thing and other firms had to struggle as to how to respond,” said Ronald Ruma, managing partner of Hancock Rothert & Bunshoft’s San Francisco office. “We didn’t think it was a prudent economic decision to raise salaries to the level of firms that had business lines we didn’t.” Hancock boosted first-year salaries from the mid-80Ks to $105,000, the current level. The increase proved to be sufficient, Ruma said, noting that the firm is not losing associates to firms with higher pay or having trouble hiring off campus. PAYING TO STAY AWAY Meanwhile the firms that rode the high-tech wave continue to struggle against the undertow. Brobeck and Gray Cary asked half of their incoming first-years to delay their arrivals by as much as one year, or stay away entirely. Brobeck offered to pay them $30,000 to forget their job offers and Gray Cary offered $25,000. Gray Cary also issued two rounds of layoffs during the year, and Brobeck axed associates in February, two months after corporate associates accepted a voluntary buyout to leave the firm. In another move to save costs, Cooley Godward and Gray Cary froze associates at their lockstep pay level so they did not see an increase in pay. Cooley did give a modest raise to second-year associates. Associates at Cooley say the freeze had a negative impact on morale. “The feeling was that maybe Cooley wasn’t a first-tier firm anymore,” one associate said. “On the other hand there’s not a lot of mobility here. … People haven’t left for pay reasons.” And Cooley, which was the first firm to lay off associates last year, has cut only a handful of associates from its Kirkland, Wash., office this year. While most firms have held their salaries constant, a few have cut back a bit. Gunderson has sliced the salaries of all but first-year associates. Fourth-years are pulling in $5,000 less than last year and seventh-years had a $10,000 pay cut. San Francisco’s Fenwick & West and Palo Alto, Calif.-based Wilson Sonsini Goodrich & Rosati provide salary ranges within a class. Fenwick has a two-tiered salary structure based on billable hours. And Wilson Sonsini pays associates within range of salaries based on a rating system. “We’re seeing a trend in the market where firms have taken a different approach to the problem,” said Gunderson partner Steven Franklin. “We may see salaries actually going down but they may not be in a horribly direct manner.” The three firms that ignored the turbulent market last year and boosted associate pay by $10,000 across the board — Brobeck, Gray Cary and San Francisco’s Pillsbury Winthrop — have gone back to their 2000 salary levels. Hiking first-year associate base pay to $135,000 “was a decision someone made doing the best they could at the time,” said Brobeck firmwide managing partner Richard Parker. “We didn’t think it was necessary or appropriate to be ahead of other firms,” so the firm adjusted salaries in the spring. But former Brobeck Chairman Tower Snow Jr. said last year’s salary increase had not been a mistake, and he disagreed with the firm’s decision to retract the raise. “When we made that decision Brobeck was coming off its most profitable year and partners had made nearly $1.2 million,” Snow said. Brobeck raised salaries to $135,000 to reward associates and to “put competitive pressure on other firms who were not as successful as we were.” Now at Clifford Chance, Snow continues to be associated with a higher associate pay scale. New York’s Clifford Chance is paying first-years the going market rate of $125,000, but is giving associates in other classes slightly more than their competitors pay. Fourth-year associates earn $170,000 and seventh-years bring in $220,000, while the top pay at other firms is $165,000 and $205,000, respectively. Pillsbury matches Clifford Chance’s $170,000 pay for fourth-years but pays $195,000 for seventh-years. Other firms have tweaked their bonus structures. Gray Cary, San Francisco’s Heller Ehrman White & McAuliffe, and Orrick, Herrington & Sutcliffe have boosted the amount of bonuses associates can earn. At Orrick Herrington, associates have to put in more hours to qualify for an initial bonus, but fewer hours to get the top-level bonuses. For associates at some firms, however, the bonus awards may be a moot point since they haven’t got enough work to log in overtime hours. “No one will hit those levels, or very few will,” said one Brobeck associate. “So salaries will go down.” Related chart: Associate Salary Survey 2002

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