Cravath, Swaine & Moore kicked off the Big Law year-end bonus pageant on Monday, telling first-year associates they’re set to receive $15,000 and granting senior associates up to $100,000.
As in past years, other Am Law firms were quick to match Cravath’s bonus scale, including Fried, Frank, Harris, Shriver & Jacobson; Milbank, Tweed, Hadley & McCloy; Paul, Weiss, Rifkind, Wharton & Garrison; and Skadden, Arps, Slate, Meagher & Flom—while some boutiques are forking over even more.
The payouts come on the heels of significant associate salary increases and midyear bonuses announced this summer, first by Milbank and later surpassed by Cravath. Coupled with the new year-end bonuses, the most senior associates at Cravath and other top-tier firms now stand to take home $465,000.
Nearly $500,000 is a lot of money by any measure. It’s also more than the average partner makes at a dozen Am Law 200 firms, according to ALM data.
Average profits per equity partner were below $465,000 last year at Bond, Schoeneck & King; Dinsmore & Shohl; Eckert Seamans Cherin & Mellott; GrayRobinson; Holland & Hart; Kutak Rock; Lane Powell; LeClairRyan; Littler Mendelson; Marshall Dennehey Warner, Coleman & Goggin; Shumaker, Loop & Kendrick; and Wilson Elser Moskowitz Edelman & Dicker. In contrast, Cravath had the fifth-highest reported PPP last year, at just over $4 million. Wachtell led the pack with PPP of $5.7 million.
The fact that senior associates at some firms can outearn partners at others—even within the Am Law 200—is just more evidence of industry stratification, said Kent Zimmermann, a law firm management consultant at the Zeughauser Group.
The top-tier firms are benefiting from compounding year-over-year and paying higher average compensation, which gives them a recruiting advantage, he said.
“Many firms are updating their strategy to account for increasing competition for sought-after lawyers,” Zimmermann said, citing increased merger activity as a sign of the pressures firms are facing.
Brad Hildebrandt, CEO of Hildebrandt Consulting, pointed out that law school enrollments have been down in recent years and, while they’ve stabilized a bit over time, that has still had an effect on the talent pool. “It’s a recruiting and retention issue,” he said.
“For the top firms, they are all trying to recruit the same group of people,” Hildebrandt said, noting that 2018 is turning out to be a very good year for law firms in terms of revenue. But attrition rates are also high, with millennial lawyers tending to leave after three to four years in Big Law, he said.
“Many firms have a shortage of associates in the five- to eight-year range,” Hildebrandt said. “You add all of that together, it always translates into higher salaries, and now it’s translating into a bonus.”
Beyond bonuses, Big Law has spent the last year wooing associates with new programs and policies. Among other initiatives, several firms implemented expanded parental leave policies, as well as various flexible remote working programs.
Others have revamped their annual review processes in favor of more informal evaluations. Weil, Gotshal & Manges also shortened its path to partnership by two years in an attempt to hang onto associates who might otherwise leave in their fourth or fifth years.