JD Journal » lockstep compensation

Morning Roundup

joshua — Fri, 27 Aug 2010 12:05:37 +0000

Good morning everybody! Today is Friday, August 27th. Here’s a quick look back at yesterday’s stories.

Many associates at Orrick, Herrington & Sutcliffe received pay raises…

Sidley Austin added to its international trade and Latin America practices….

Former pitcher Roger Clemens will be arraigned Monday in on charges he lied to Congress about his use of performance-enhancing drugs…

Raises (sort of) and Bonuses at Pillsbury

joshua — Thu, 04 Feb 2010 16:01:35 +0000

Let’s start with the easy part. Associates in the New York office of Pillsbury are having their salaries restored to the level they would have been at had they never been frozen in the first place, so long as they met their billable hour target of 1,755 hours. Associates that missed their target are still getting a raise, but are only being bumped up one level.

Outside of New York, associates are also getting raises but based on a new compensation model that has base pay set lower. For example, first year associates in California will have a base pay of $145k instead of New York’s $160k. This isn’t terribly uncommon and we’re still on familiar ground here. Associates in DC, Virgina and California (but not Sacramento) who hit their billable hour target for the year will get an extra bonus bringing them up to the New York base pay level. Seems reasonable. All other US associates are stuck with their lower salaries.

Salaries for Asia have not yet been set and the firm says it’s working on it.

Things get a bit more complicated for bonuses. Once again, New York associates have a clear bonus plan that matches the Cravath scale. Outside of New York, associate bonuses are tiered based on some combination of billable hours and merit, and will either be less than the Cravath scale (for the somewhat meritorious) or at the Cravath scale (if you’ve been very very good this year).

Vinson & Elkins Issues Bonuses and Raises

joshua — Fri, 29 Jan 2010 19:46:38 +0000

Vinson & Elkins associates are having their salaries thawed out and returned to where they would have been without the salary freeze. This puts V&E at the top of the muddled salary market.

UPDATE: We’ve received tips saying that only New York associates are getting the salary boost. If you have any hard information on the state of V&E associate salaries outside of New York, send us a tip here.

The firm is also handing out Cravath scale bonuses. What is missing is any kind of “make whole” bonus, to restore the money associates missed out on by having their salaries frozen to begin with.

Vinson & Elkins LLP is an international law firm with more than 770 lawyers across 14 offices worldwide, including 19 lawyers in Abu Dhabi and Dubai. The firm was founded in Houston, Texas, in 1917 by James Elkins and WIlliam Vinson.

Cooley Godward Salary Thaw, and is there a Market Rate Anymore?

joshua — Fri, 22 Jan 2010 22:09:33 +0000

Cooley Godward has lifted last year’s salary freeze, sort of. First years will continue to make $160k, which puts them ahead of firms that have cut first year salaries, second years move up to $165k and third years jump up to $170k. This isn’t a true up, but Cooley third years are once again earning more than the class below them.

Two years ago, biglaw salaries were pretty much the same across the board, so salary wasn’t typically a factor in choosing where to work. Now things are a bit messier. Among the firms sticking with lockstep compensation, some have cut salaries, some have cut salaries outside of major markets, some have frozen salaries, some have thawed salaries, and some have thawed salaries with a “true up”. And as difficult as that can be to sort out, the situation gets far more complicated when looking at the firms that have moved to merit based compensation plans. Most, but not all, have adopted a three tier system, and most of those have two levels within each tier. Some have cut base pay with the promise of potential greater earnings, some have not. Some are holding back a percentage of pay to be released upon hitting certain milestones.

All of this means that there is no longer a “market rate” for associate compensation. That may not matter much this year, since new graduates aren’t likely to be quite as picky about where they work so long as they have a job, but as the economy improves, these variances in salary are going to be one of the factors attorneys evaluate in choosing a firm. Will we see a return to a standardized salary across the board, and if so, which plan will win out?

Goodwin Procter Pays Bonuses, Thaws Salaries

joshua — Wed, 20 Jan 2010 19:46:00 +0000

Goodwin Procter is paying 2009 bonuses to its associates who hit their billable hour goal of 1850 hours, maybe. Bonuses will more or less match the Cravath bonus scale, maybe. If the firm feels like it. Associates that billed 1850 hours will be considered for, but not guaranteed a bonus, and the firm provided a nice chart showing Cravath-like bonuses but said that actual bonus amounts will be based on other factors.

The firm also told its associates that it was abandoning lockstep compensation, maybe. But not this year. Although the firm has (apparently) hated lockstep for years, this year it will study the issue holistically. In the mean time one thing is for certain, Goodwin Procter is thawing out salaries. It’s not a true up – associates are only being bumped up one year, but it’s a far cry better than the firms using merit based compensation to mask a pay cut.

Goodwin Procter LLP employs 900 attorneys in Boston, Los Angeles, New York City, Silicon Valley, San Diego, San Francisco, and Washington DC.

Dickstein Shapiro Abandoning Lockstep

joshua — Thu, 14 Jan 2010 18:53:04 +0000

The lockstep march away from lockstep compensation continues unabated as 2010 gets into full swing. The latest firm to join the thundering herd is Dickstein Shapiro, which will initiate a three tiered merit based system as of January 22. Regulars readers of our page are no doubt familiar with the basic concept – associates are broken down into three tiers based on various subjective and objective criteria. Dickstein Shapiro associates are, in yet another market conforming convention, broken down into A and B levels within their tiers to determine base pay.

Entry level A associates will be making $145k per year and Entry B associates will earn $160k. What’s the difference between level A and level B associates? According to a statement made to abovethelaw, it’s “…based on their achievement in a number of core competencies, including productivity, problem solving, legal research, writing, communication, fact development, negotiation skills, supervisory responsibilities, and adherence to the firm’s core values…”.

Maybe it’s just me, but if I had known that I could earn $145k per year working as a lawyer in a major law firm without being productive, competent at problem solving, legal research, writing, communication, fact development and negotiating, I would have chosen a different career. That sounds like easy money. As for supervisory responsibilities, how much supervising are entry level associates expected to do?

It’s easy to pick on Dickstein Shapiro for basing salary differences on the skills required to be a lawyer, but the truth is it’s not all that different from a variety of firms moving toward merit based compensation plans.

Dickstein Shapiro LLP, founded in 1953, is a multi-service law firm with more than 400 attorneys in Washington, DC, New York, and Los Angeles.

Salary Cuts at Kaye Scholer

joshua — Wed, 13 Jan 2010 18:45:14 +0000

Kaye Scholer is cutting first year associate salaries to $145k, but unlike many other firms they aren’t doing it under the guise of abandoning lockstep compensation. Additionally, any associate that hits their billable hour target by December will be getting a bonus that should bring them back to or above $160k. In the meantime, associates that hit 1800 hours last year will be getting their lockstep raises, and Kaye Scholer has announced bonuses ranging from $20k to $40k for 2009.

In order to qualify for the 2009 bonus, associates must have billed 2200 hours (for $20k) and 2400 hours (for $40k), but the interesting kicker is that all classes are receiving the same bonus, providing they hit the targeted number of hours. For junior associates that made the goal, this is an above market bonus, although it’s a bit light for senior associates in the 2200 hour category.

Kaye Scholer was founded in 1917 by Benjamin Kaye and Jacob Scholer. The firm has more than 500 attorneys in eight offices located in New York, Chicago, Frankfurt, London, Los Angeles, Shanghai, Washington DC, and West Palm Beach.

Holland & Knight is the Next to Abandon Lockstep

joshua — Fri, 18 Dec 2009 21:46:28 +0000

I think it’s time for some new terminology. Lockstep compensation referred in the past to associates moving up in pay scale in “lockstep” with their contemporaries. All associates from the same class got the same raise, year after year. But it also holds another connotation – that all biglaw firms move together in lockstep when it comes to associate compensation, in order to not be left behind in what used to be fierce competition for the top graduates each year. Well the firms are still in “lockstep”, but now they’re marching together away from class based yearly pay raises and into merit based systems.

Holland & Knightis the latest firm to join the lockstep march away from lockstep compensation. The firm is moving toward a merit based system but unlike the three tiered system being floated by many of its competitors, H&K will go to an individualized system that they believe is more fair to the attorneys. In a bizarre twist (and a cutting edge use of the English language) H&K characterized the systems being adopted by others as being uncertain, providing little stability for associates, and said “… we’re moving to a system with a lot of quantitative and subjective factors.” Setting aside for the moment that a system using subjective factors to determine salaries is not likely to be universally accepted as fair, certain or stable, there’s also the interesting contradiction between quantitative and subjective factors. Does anyone else think this sounds like being “a little bit pregnant”?

H&K, again like nearly all its contemporaries, is using this time to cut first year salaries. In addition to the overall salary cut that happened in July, first year associates are taking another ding, dropping down to $130k.

Holland & Knight is a law firm with more than 1,150 lawyers in 23 US offices. Foreign offices include Beijing, China, and Mexico City, Mexico, with representative offices in Caracas, Venezuela, and Tel Aviv, Israel.

Kelley Drye Trifecta – Abandon Lockstep, Freeze Salaries, Pay Bonuses

joshua — Fri, 18 Dec 2009 18:32:32 +0000

In a firm wide email sent out yesterday, Kelley Drye managed to fold what would typically be three different stories into one.

Over the next two years, Kelley Drye will move away from lockstep compensation and into a merit based pay scheme. Details have not yet been worked out. As a first step, however, 2010 salaries will be frozen at 2009 levels. Salaries for incoming associates, who were scheduled to begin in January, have not yet been set and according to the firm would be decided “early next year”. Looking at my calendar, January appears to me to be pretty early in the year so I certainly hope by “early next year” the firm means “within the next two weeks”. Either that or the firm is planning to re-defer their new associates but forgot to tell anyone. As a final point of business, the email said that bonuses for this year would range from $10k to $30k which puts them above the Cravath bonuses on the low end, assuming that first year associates receive bonuses at all.

Kelley Drye & Warren LLP is an American law firm headquartered in New York City. It has over 300 attorneys in 7 offices, including an affiliated office in Mumbai.

Seyfarth Shaw Abandons Lockstep

joshua — Thu, 17 Dec 2009 18:54:12 +0000

Like many firms before it, Seyfarth Shaw is abandoning lockstep starting in 2011. Details haven’t been released, not even to the associates who must now spend next year trying to hit performance goals that have not been announced in order to receive salaries that have not yet been determined but that’s just part of the charm of working for biglaw. 2010 salaries will be based on 2009 performance and although exceptional associates can expect a 5% salary increase next year, those that merely met expectations will be rewarded with a 5% pay cut. Exceeding expectations without being exceptional is good enough to get you a salary freeze, so a second year associate that is exceeding expectations can expect to be paid the same as a wet behind the ears first year and a second year associate meeting expectations will be paid less than colleagues that haven’t had the pleasure of prepping their first document. Seyfarth Shaw’s web page says that they pay “competitive salaries”. Who knew that meant competing with each other to avoid being paid less than a first year…

I’m not sure which is more insulting – getting a 2010 pay cut for meeting 2009 expectations, or being told that at the end of 2009.

UPDATE: A tipster reminded me that Seyfarth Shaw has already cut the salaries of the incoming first year associates by five to ten percent, so meeting expectations isn’t going to drop your salary below that of a first year associate after all. Well, isn’t that a relief.

Morning Roundup

joshua — Wed, 16 Dec 2009 17:13:07 +0000

Good morning everyone! It’s Wednesday, December 16, and here’s a quick look at yesterday’s news…

Sonnenschein lays off some staff and abandons lockstep compensation….

WilmerHale also ditches lockstep….

Nixon Peabody associates get a last minute deferral…

and the partnerships at Hogan & Hartson and Lovells have approved the merger plans…

Sonnenschein Abandons Lockstep and Cuts Staff

joshua — Tue, 15 Dec 2009 22:30:57 +0000

There are two unconnected stories coming out of Sonnenschein today.

The first is that the firm has made staff cuts 14 days before Christmas. The firm has confirmed the staff layoffs to abovethelaw.com but no details were provided on the number of staff cut. No associates were cut.

The firm also laid out the outlines of its new compensation plan being implemented in early 2010. I say outlines, because important details like base compensation seem to have been overlooked. Like many other firms, Sonnenschein is moving to a three tiered merit based system. The firm says that bonuses based on merit will make up a larger part of associate salaries. Although everyone certainly appreciates a large bonus, it does make financial planning a bit more difficult – particularly when nobody yet knows what the baseline pay will be.

Sonnenschein Nath & Rosenthal is an international law firm headquartered in Chicago with 13 offices and 800 attorneys around the world.

WilmerHale Ditches Lockstep

joshua — Tue, 15 Dec 2009 20:12:44 +0000

WilmerHale is abandoning lockstep compensation and adopting a merit based three tiered system that should look familiar to anyone that’s read these pages over the past few months. The new compensation plan, cleverly titled “career advancement program” or “CAP” will take effect in 2012. But not to worry, WilmerHale has found another time honored method of holding labor costs down in the mean time. Next years salaries look remarkably like this years – yes, the firm is instituting a salary freeze for everyone but second year associates, who will receive a $5k bump in compensation.

Wilmer Cutler Pickering Hale & Dorr LLP has twelve offices across the US, Europe and Asia. It was created in 2004 through the merger of the Boston’s Hale & Dorr and the Washington’s Wilmer Cutler & Pickering, and employs more than 1,100 attorneys worldwide. As of 2008, it was the 23rd largest law firm in the world in terms of revenue.

DLA Piper Abandons Lockstep

joshua — Tue, 08 Dec 2009 21:40:19 +0000

DLA Piperhas joined the lockstep march away from lockstep compensation. In a memo today, the firm outlined its new associate compensation package. In broad terms, it looks familiar. The overall structure resembles the plan published recently by Orrick, a three tier system with levels within the tiers. Unlike Orrick’s plan, however, DLA Piper associates will have 15% of their pay withheld each year and will have to earn it back by achieving what amounts to a certain grade on their performance review. True, the grades are numerical, not alphabetical, but the descriptions are reminiscent of grade descriptions commonly found in law school. What’s more, DLA Piper outlined the percentage of associates they expect to make each grade, leading AboveTheLaw to refer to it as a grading curve. You can also see a copy of the memo at ATL. It’s not clear that it is a curve, however, since there’s no indication that the expected percentage of associates at each grade level is fixed.

Friday Roundup

joshua — Fri, 04 Dec 2009 20:37:46 +0000

Hello everyone! Thanks to a minor electrical problem this isn’t so much a morning roundup as an early afternoon one.

Pepe & Hazard is reported to be in merger talks…

The couple who gained notoriety for crashing the state dinner has retained counselfrom Dewey & LeBoeuf…

BigLaw wants to raise rates, and corporate America doesn’t want to pay…

And Orrick is moving away from lockstep in a big way….

Orrick Moves Away From Lockstep

joshua — Thu, 03 Dec 2009 22:50:06 +0000

Orrick presented its new compensation plan to its associates today, and there was much rejoicing. Unlike many firms that cut base salaries with discretionary bonuses, Orrick kept the $160k starting salary for first year associates. After that associates will be arranged in three tiers, associates, managing associates and senior associates. The three tier system is something we’ve seen from several firms that have abandoned lockstep this year, but Orrick also has multiple pay scales within each tier. At the high end, senior associates will pull down a base salary of $250k, plus bonuses. In addition, Orrick says it will pay bonuses at market rate plus an additional discretionary amount of 5-15%, depending on tier. This is a very competitive structure and should make Orrick a strong competitor for recruitment. The salary changes will begin in 2010 but the firm says it will pay bonuses for 2009 based on this structure.

Sutherland Ditches Lockstep

joshua — Mon, 23 Nov 2009 22:29:05 +0000

Atlanta based Sutherland is joining the rush to abandon lockstep compensation and is moving to a merit based system similar to the one other top firms have adopted or are planning to adopt. Associates will be classified as junior, mid-level and senior, with the levels roughly corresponding to their time in the firm. Unlike lockstep compensation increases, however, it’s possible for an associate to move forward at a faster or slower pace than his or her classmates, based on demonstrating proficiency at certain core skills. Sutherland says this change is designed to meet the wishes of their clients, many of whom are unwilling to continue to pay billing rates based solely on the length of time an associate has been with the firm.

Additionally, Sutherland is cutting the pay for new associates in its Atlanta office, but associates in its other offices will continue to earn $160k. Atlanta associates will now start at $135k.

All Associates Meeting at Sidley Austin

joshua — Wed, 11 Nov 2009 21:44:34 +0000

Sidley Austin had an all associates meeting in Washington DC today. Details, or rumors at least, are beginning to trickle out from the meeting, but nothing hard and fast as of yet. Some tipsters are reporting that Sidley hinted at bonuses larger than last year, and some reports say that the firm may be moving away from lockstep compensation. If you have any solid information for us, please send us an anonymous tip here.

Reed Smith Cuts Salaries

joshua — Tue, 10 Nov 2009 17:51:59 +0000

Just a few weeks after announcing it was moving away from lockstep compensation and doing away with associate classes, Reed Smith is cutting associate salaries by 20% for all incoming associates and reducing their billing rates by an equal amount. This move is certain to be popular with clients who are unhappy with paying full rates for new lawyers, in effect paying for on the job training.

Billable hour targets for first year associates have also dropped from 1900 to 1700 so that the new lawyers can take advantage of new training programs.

Founded in 1877, Reed Smith LLP employs 1500 attorneys in 23 cities worldwide. The firm counsels 28 of the top 30 US banks, and 10 of the world’s 12 largest pharmaceutical companies. In addition to the United States, Reed Smith has offices in the United Kingdom, continental Europe, Asia and the Middle East.

Reed Smith Joins the Move Away from Lockstep

joshua — Tue, 27 Oct 2009 21:25:19 +0000

Citing client concerns with billing practices, Reed Smith announced a new compensation plan today. The new plan, which the company cleverly named CareeRS, separates associates into three tiers and three compensation plans based on performance. Associates will either be junior, mid level or senior, depending on how well they have demonstrated “core competencies”.

Squire Sanders Moving from Lockstep

joshua — Wed, 21 Oct 2009 00:32:18 +0000

Squire Sanders has joined the march away from lockstep compensation, and will implement a merit based pay system starting next year. Details are still being worked out. The firm says the move away from lockstep is due to the changing economy and the expectations of clients.

Squire Sanders has had a rough year. As we’ve reported previously, they’ve made several cost cutting decisions, including lowering base salaries, layoffs, and cuts to their summer program.

Squire Sanders was founded in 1890 in Cleveland, Ohio, and has 32 offices today in 15 countries.

Fingers Crossed at Fulbright

joshua — Tue, 08 Sep 2009 20:48:36 +0000

How do you pass a performance review when you have no idea what the standards are? This is the question on the minds of associates at Fulbright & Jaworski, who begin undergoing just such a review this week. The stakes are high – Fulbright has moved to a performance based compensation system. Sorry, make that a “competency-based advancement program”, whatever that means exactly.

Associates at Fulbright have already weathered one round of layoffs this year. We reported on cuts made in late July/early August. Will these performance reviews lead to further reductions?

Founded in 1919, Fulbright & Jaworski LLP employs over 1,000 lawyers in 16 locations in Austin, Beijing, Dallas, Denver, Dubai, Hong Kong, Houston, London, Los Angeles, Minneapolis, Munich, New York, Riyadh, San Antonio, St. Louis and Washington, DC.