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Juan F. Vasquez Jr. was enjoying a family ski vacation in Breckenridge, Colo., recently — riding the Beaver Run SuperChair lift to Peak 9 — when his cell phone rang. Vasquez, a third-year tax associate with Chamberlain Hrdlicka White Williams & Martin in Houston, realized the call was coming from his boss, shareholder George W. Connelly. He took the call and learned that the firm was sharing some of its 2004 earnings with him in the form of a larger-than-expected bonus check. “It was great,” says Vasquez who was vacationing with his wife, daughter, parents and brother. “I paid for dinner that night.” Like a handful of other large Texas firms, Chamberlain Hrdlicka distributed or plans to distribute discretionary associate bonuses for 2004 that exceed the amounts — in some cases by more than double — of the bonuses paid in 2003, according to a survey of the 25 largest firms in Texas, which are listed on Texas Lawyer‘s “The 100 Largest Firms in Texas” poster, published June 28, 2004. Six firms among Texas’ largest 25 did not respond to a request for information — Austin-based Clark, Thomas & Winters; Dallas-based Godwin Gruber and Jackson Walker; Fort Worth-based Cantey & Hanger; Houston-based Beirne, Maynard & Parsons; and Jones Day, which has offices in Dallas and Houston. Some firms are paying higher bonuses due to higher revenues; others are competing with the bonus amounts distributed in the New York market. Other firms report that they are doing nothing unusual this year and that the bonuses are similar to those distributed for 2003. At Houston-based Chamberlain, 2004 revenue of $38.9 million exceeded the previous year’s revenue by $3.1 million. The 90-lawyer firm generated new business in all its practice areas, particularly in the tax specialty, says managing partner Wayne Risoli. “Last year our highest [associate] bonus was $17,000 and this year our highest bonus was $50,000,” Risoli says. Vasquez declines to discuss his bonus amount but says it greatly exceeded his expectations. Vasquez and wife Alison, a manager in the Houston office of PricewaterhouseCoopers, plan to use the extra money to establish a Roth IRA for 9-month-old daughter Claire, pay off some credit card bills, and plan another vacation. “It is reassuring and rewarding that the firm and shareholders will share with those who contribute to the success of the firm,” he says. “It creates an extremely positive outlook for 2005.” Weil, Gotshal & Manges, with an eye on the New York market, is also upping the ante paid for 2004 associate bonuses, says Mary Korby, chairwoman of the firm’s professional evaluation and compensation committee. Weil Gotshal has more than 1,200 attorneys firmwide, 119 of them in Texas. The firm has two reward levels for associates — a “solid performer bonus” and a “distinguished bonus,” she says. The solid performer bonuses, which 80 percent of the associates will receive this month, will range from $30,000 to $65,000, she says. The distinguished bonus — awarded for superior performance in a particular case or deal or other activity — will be paid in addition to the $30,000 to $65,000 solid performer bonuses, she says. “We look at eight or 10 top-ranked [New York-based] firms and look at what they are paying [associates],” Korby says. The firm tries to match the New York market bonuses with its solid performer level payout and exceed the market with the distinguished bonus amount, she says. The Weil Gotshal bonuses are not hours-based, she says. “We are very much philosophically opposed to hours-based targets,” Korby says. “It sends the wrong message to our associates and to our clients.” BILLABLE HOURS PLUS W. Mike Baggett, chairman and CEO of Dallas-based Winstead Sechrest & Minick, says the firm includes a bonus pool each year in its annual budget planning. The firm bases the pool on expected revenues and expenses and on what the market — both peers and competitors — is doing for associate bonuses, he says. “We had a good year in 2004, so I will say our bonuses this year are very good, probably a little bit above market,” Baggett says. He declines to reveal the dollar amounts of the bonuses the 317-attorney firm distributed in mid-December 2004. Baggett says the rewards are based on a combination of billable hours and other contributions to the firm such as community involvement. “Since our philosophy is teamwork and building a bigger pot for everybody, we encourage all lawyers at all levels to do more things than just billable hours to make the firm work,” he says. During the first years of their careers, associates will receive a bonus more dependent on their billable hours but in later years the bonus amount becomes increasingly dependent on more subjective contributions, he says. “What we don’t want to teach them [associates] is that billable hours is the beginning and ending of the world,” Baggett says. Dallas-based Thompson & Knight is transitioning in 2005 to a bonus system where there is greater room for discretion and less reliance on billable hours, says Stephen Rasch, head of the firm’s legal personnel committee. The associate bonuses for 2004 are based on the firm’s former billable hours-based system, he says. For 2005, the firm is raising first-year associate salaries to $115,000 and providing a discretionary bonus. Rasch says there is no cap on the discretionary bonus amounts for associates at the 315-attorney firm. “We wanted to put an emphasis on professional development and career development and not exclusively reward billable hours,” he says. Houston-based Baker Botts instituted a new bonus system in 2004 to reward associates for all “chargeable hours” including billables, pro bono and other firm activities. The bonuses, distributed Dec. 20, 2004, ranged from $5,000 to $50,000, says Gregory Nelson, partner in charge of the 668-lawyer firm’s Houston office. Thad Holt, director of administration for Austin-based Brown McCarroll, says the 196-attorney firm’s discretionary associate bonuses are based on overall performance, including billable hours. Holt declines to report the dollar amounts of the bonuses that will be distributed this month but says he expects the dollar amounts to be similar to the bonuses distributed last year. Holt says that associates receive their performance evaluations in the fall, but don’t receive bonuses until the following January. “The idea is … in the evaluation process, we want them to be focused on what the evaluation says and not focused on what their compensation will be.” STRONG FOURTH QUARTER Robert Wilson, managing partner of Dallas-based Haynes and Boone, says the firm’s last three to four months during 2004 were “extraordinary, cash-flow wise.” Notes Wilson, “Well, I think for all law firms it was a touch and go year. There was no assurance you would do well economically because the legal market was depressed. But slowly it [revenues] started climbing up and up and up.” The 421-attorney firm distributed bonuses mid-December 2004, and due to the healthy year-end, each associate received the maximum discretionary bonus available for their associate level, he says. Wilson declines to reveal the amounts. “If the law firm does well, then everybody does well,” Wilson says. Joseph Dilg, managing partner of Houston-based Vinson & Elkins, says the firm has not yet made a decision on discretionary associate bonuses for 2004. “All New York firms paid larger bonuses this year, so it’s a more competitive situation,” he says. “The firms outside of New York are watching that to see what it means. We always want to be competitive.” The 729-attorney firm will review 2004 financial results and discuss bonuses later this month, he says. Several firms typically give annual discretionary bonuses, but like V&E, have not yet determined the amounts. The firms include Dallas-based Strasburger & Price; Thompson, Coe, Cousins & Irons; Akin Gump Strauss & Feld; and Gardere Wynne Sewell; and Houston-based Bracewell & Patterson. David McFarland, chairman of the associates committee at Thompson Coe, says the firm will probably have one of its bigger years for associate bonuses. By comparison, bonuses for 2003 ranged from 5 percent to 30 percent of associates’ annual salaries, he says. Dallas-based Hughes & Luce and Houston-based Fulbright & Jaworski typically distribute discretionary bonuses but they decline to discuss the dollar amounts involved. Although Locke Liddell & Sapp, which is based in Dallas and Houston, is not distributing discretionary associate bonuses for 2004, the associates are awarded “standard market bonuses,” says David Taylor, administrative partner in the firm’s Houston office. The performance-based bonuses are tied to variables such as whether the associates are developing clients and recording a reasonable number of hours, he says. “The pledge we make to our associates is that if they perform above the market, they will be paid above the [Texas] market,” Taylor says. Dallas-based Jenkens & Gilchrist also distributes performance-based annual bonuses, rather than discretionary bonuses, to its associates, says Petri Darby, the firm’s public relations manager. The bonuses are distributed mid-year, he says. Houston-based Andrews Kurth typically pays merit bonuses to associates in mid-December based on performance evaluations (not billable hours), says firm executive director Bill Livesay. He says the merit bonuses this year ranged from $1,000 to $35,000. Austin-based Linebarger Goggan Blair & Sampson declines to discuss associate compensation.

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