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Despite periodic warnings over the past year that the weak economy could preclude the payment of associate bonuses, most major New York law firms have by now announced plans to pay bonuses for 2002, though at lower levels than the year before. In short order, Cravath, Swaine & Moore; Sullivan & Cromwell; Davis Polk & Wardwell; Paul, Weiss, Rifkind, Wharton & Garrison; Debevoise & Plimpton; Cleary, Gottlieb, Steen & Hamilton and several other firms decided they would pay first-year associates $17,500, with senior associates receiving $25,000 or more. Firms such as Shearman & Sterling; Chadbourne & Parke; Mayer, Brown, Rowe & Maw; Proskauer Rose, LeBoeuf, Lamb, Greene & MacRae and others came in slightly lower, with a $15,000 bonus for first-year associates. Moreover, firms’ decisions on bonuses this year have proceeded amid considerably less controversy than in 2001, when turmoil ensued following the widespread dissemination of an October memo from partners at Davis, Polk & Wardwell declaring there would be no bonus, a decision the firm later reversed. Unlike last year, when firms seemed to agonize over whether or not to match other firms’ higher bonuses, this year has seen mostly swift alignment in the marketplace. Indeed, some firms were determined to avoid the bonus-matching headaches of years past. According to a source inside the firm, Sullivan & Cromwell partners decided in advance that this year’s bonuses would be adjusted if necessary to match any other New York firm except Wachtell, Lipton, Rosen & Katz, which has traditionally paid far higher bonuses than other New York firms. This year, Wachtell paid bonuses starting at $50,000 and reaching as high as $170,000. There is now little doubt that, apart from layoffs, bonuses have become the primary focus of associate satisfaction, or dissatisfaction, with their firms. Associate complaints about bonuses play a major role in where firms rank in surveys conducted by The American Lawyer magazine, a New York Law Journal and affiliate, and by Vault, a career information group that is also affiliated with the New York Law Journal. According to the latter’s recent guide to the nation’s most prestigious law firms, Davis Polk’s reticence about 2001 bonuses was the main reason the firm dropped from number four to number five in the rankings. The brouhaha unleashed by October’s Clifford Chance associates’ memo provides an even clearer illustration of the manner in which bonuses weigh on asssociates’ minds. The memo, which became public, let the world know that the London-based firm was pegging bonuses to a guideline of 2,200 client hours and 220 other hours billed. It also put firms on notice that falling short on bonus expectations was inviting associates to bite back wherever they could, even to the point of generating a public relations fiasco. This year, the firm dropped the 2,420-hour guideline and paid bonuses starting at $17,500 for first-years. ECONOMIC ENVIRONMENT In the current economic environment, law firms continue to be wary of generating negative publicity on compensation, as top law students continue to have choices about employment opportunities. One second-year student at Columbia Law School acknowledged that her perceptions about which law firms were “best” was likely influenced by various rankings and surveys, not to mention postings on the various “Greedy Associate” Internet message boards. “You know you can’t trust everything you read there,” she said, “but we don’t have a lot of other information on firms, other than what they tell us.” But firms’ concern about associate discontent falls as associates rise in the firm. The bonuses for 2002, for instance, represent a much lower drop for the most junior associates than for mid-level or senior associates. For junior associates, bonuses are down only slightly from 2001, when first-years received $20,000, which itself was half of the previous year’s $40,000. For senior associates, however, the numbers were down far more significantly. Last year, most firms paid bonuses of $50,000 to senior associates. This year, many firms reduced that number to $25,000. In 2000, senior associates received $100,000. One managing partner said this year’s numbers somewhat represented the realities of the lateral associate market. Not only has hiring died down, he said, lateral associates have always been less influenced by sheer economics than other factors. “After spending four or five years at a firm, an associate has to really believe the grass is greener,” he said. “I don’t think a slightly higher bonus is enough by itself.” Another managing partner pointed out that firms have to think about other constituencies besides law students. Noting that investment banks and other financial services companies have slashed work forces and drastically reduced bonuses in the past year, he said law firms were wary of appearing not to share their client’s pain. “It did occur to us that it might not be appropriate to pay humongous bonuses this year,” he said. One Clifford Chance associate said his peers generally judged bonuses on a relative basis. Complaints arose, he said, chiefly when associates perceived that other associates, either within the same firm or at rival firms, were getting paid more. “It’s like a family where your brother or sister gets a higher allowance than you do,” he said. “You know it’s stupid, but you can’t stand it.”

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