Will Bonuses Be Cut? Cravath and S&C Key to the Answer

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Will Bonuses Be Cut? Cravath and S&C Key to the Answer

Posted Nov 18, 2008, 07:39 am CST
By Debra Cassens Weiss

Update: Cravath Cuts 2008 Associate Bonuses, Says 2009 Bonuses Could Be Zero

Will law firm bonuses be cut for associates this year? The answer could depend on decisions by Cravath, Swaine and Moore and Sullivan & Cromwell.

The two law firms are usually the first to announce associate bonuses, setting the standard that many large law firms choose to follow, the National Law Journal reports. Cravath was the first to make the announcement last year, saying it would pay a year-end bonus of $35,000 to $60,000 in addition to a special bonus of $10,000 to $50,000.

Firms may not be so eager to make quick bonus decisions this year as they face an economic downturn and clients seeking discounted legal fees, the story says. But at least one law firm leader believes year-end bonuses will remain unchanged, although special bonuses will be eliminated. He adopted that view based on the discussion during a meeting of law firm managing partners hosted by Citigroup Private Bank in August.

Cravath and Sullivan & Cromwell aren’t tipping their hands. S&C chairman H. Rodgin Cohen told the NLJ the firm has not yet discussed the issue. Cravath did not respond to the publication’s request for comment.

One firm leader has indicated that law firms based outside New York may be reluctant this year to follow the lead of their East Coast counterparts. Orrick, Herrington & Sutcliffe laid off 40 associates and counsel last week, and its chairman Ralph Baxter said many law firms may be rethinking their bonuses.

He told the National Law Journal that the current system is “not sustainable” because it depends on charging clients more and working associates harder. As for Orrick, he said the law firm set a bonus structure earlier this year that pays the same maximum amount as the firm did last year. Because the system is based in part of billable hours, fewer associates will receive bonuses this year, he said.

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Posted by B. McLeod - 1 month, 2 weeks, 6 days, 17 hours, 45 minutes ago

This is a great time for young lawyers (actually any lawyers without “big books o’ business”) to pay down debt and set up cash reserves.

Also a great time for lawyers just starting out at the big firms to forego the jaguar and the $600,000 mortgage for the first 3-5 years, in order to have cash reserves. Absent an established client base, one really needs a reserve (the “Associate’s” true ticket to portability and survival).
Posted by We need Ron Paul - 1 month, 2 weeks, 3 days, 18 hours, 25 minutes ago

Just another reason why corporations should not use big law firms. They are only out to make money and don’t have a clue what the client actually needs.

Maybe to get that bonus they will use 3 lawyers instead of 5 to review a contract.

Just another reason my corporate work goes to law firms with under 50 lawyers.
Posted by K - 1 month, 2 weeks, 3 days, 17 hours, 20 minutes ago

Cravath announced yesterday - half of last year’s bonus. Skadden announced the day before - same as last year. Chances are most big firms will fall somewhere in between that.
Posted by AH - 1 month, 2 weeks, 3 days, 14 hours, 7 minutes ago

#2—Sorry, but your post is plain wrong. Please mention the name of one firm, no matter the size, that isn’t out to make money. Law may be a specialized practice, but it’s no different than any other business, big or small. All law firms are out to make money.

Now, if you were to say that you use smaller firms because they charge lower hourly rates and you find that the work is comparable to larger firms, I would understand your point.

You also apparently don’t grasp the typical firm bonus structure. This sentence: “Maybe to get that bonus they will use 3 lawyers instead of 5 to review a contract” makes absolutely no sense.
Posted by Cali Girl - 1 month, 2 weeks, 3 days, 11 hours, 56 minutes ago

Bonuses? Are you serious? We’re just hoping we all get to keep our jobs next year, never mind thinking we’ll get any kind of raise, and don’t even consider for a minute that you might be getting any kind of bonus.
Posted by Rocco - 1 month, 2 weeks, 2 days, 18 hours, 32 minutes ago

I just got my year end bonus at the PD’s office: Another murder case added to my caseload.

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