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Law Firms Lowering Year-End Bonuses
Cravath, Swaine & Moore LLP usually sets the tone for law firm end of year bonuses in the legal world, but this year they will be dolling out bonuses at the same amount as 2010. These are signs are a troubling economy, with the legal world not being exempt from it either. The bonuses for 2011 are just a little bit higher than the ones handed out in 2009 but are still much less than the ones handed out in 2007.
Some of the youngest and least experienced members of law firms are associate attorneys, ones who rely on those yearly bonuses to help pay debts accrued from law school tuition. Cravath was the first major law firm in the country to announce what its bonus structure would be at the end of the year.
Lawyers working at Cravath for close to seven years, the most senior lawyers of the firm, will take home close to $37,500 in the bonus. This is an increase of $2,500 from the 2010 bonuses. Lawyers working with the firm for a handful of months, junior associates, will bring home $7,500, which is the same bonus amount as in 2010. The bonuses for lawyers in between those two ranks will depend each lawyer’s seniority and will fall in that price range.
First-year associates make annual salaries of $160,000 while senior associates make close to $265,000 per year. Profits have risen at Cravath in 2009 and 2010, but the information about the 2011 bonuses does not help experts understand what type of year Cravath endured. Peter Zeughauser is a law firm consultant and he had the following to say:
“It could just be that the firm has decided it wants to do other things with its money, like prepay some expenses,” said Mr. Zeughauser. “This year has steadily gone downhill for a lot of firms. Frankly, it’s gotten worse each quarter.”
In 2010, there were some complaints from associates working at Cravath, mainly about the size of the bonuses handed out, because they increased marginally from 2009. Complaints also included the fact that the bonuses were still lower than the ones handed out in 2007. Some law firms paid out bonuses as high as $60,000 in 2007, with the Cravath firm paying out $50,000 bonuses in 2007.
Law firms are made up of two types of lawyers; associates who are salaried and partners, who each own a stake in the law firm. The American Lawyer Magazine said that in 2010, the law firm made $3.2 million in profit-per-partner. The magazine also said that this number was a 16.8 percent increase from the number in 2009. Law firms across the country are lowering their bonuses in 2011 in an effort to save money instead of cutting staff members from the payroll. Some firms are completely ruling out issuing bonuses in 2011, a move that is not unexpected.