Cravath Announces Bonuses After Big Salary Jump

Cravath, Swaine & Moore has announced associate year-end bonuses ranging from $15,000 to $100,000, depending on seniority.

The news was reported by the legal blog Above the Law , which published a copy of the memo signed by four firm leaders including Faiza J. Saeed, its newly elected presiding partner who will assume that role on January 1.

The bonuses are the same as last year and will be paid on Friday Dec. 16. They come after Cravath made headlines this summer when it raised base salaries for associates, translating to a raise of $160,000 to $180,000 for the most junior—the first raises in nearly a decade.

The memo, per ATL, explained:

“The Firm does not apply any billable hour or similar criteria in determining eligibility for associate bonuses. As always, while receipt of the bonus for each individual attorney is dependent on suitable performance at that attorney’s experience level, virtually all our associates will receive the full bonus.”

David Lat, managing editor at ATL, responded to a series of questions about the bonuses by email, covering what they mean for the legal industry and what to expect in this year’s bonus season as more law firms will undoubtedly pile onto the holiday bonus spree.

Below is our exchange.

Big Law Business: Back when Cravath announced salary raises this summer, it seemed to put the pressure on competitor law firms to match — perhaps more than they could or should, given their financials. Do you think other law firm leaders are now sighing in relief that Cravath hasn’t upped the ante with bonus raises?

Lat: I think the heads of Cravath’s peer firms are relieved that Cravath kept bonuses at their current levels. Financial analysts have already started noticing how the pay raises from the summer are affecting law firm profitability, and raising bonuses over last year’s levels would have exacerbated this effect.

Big Law Business: How significant is it that Cravath announced no raises in bonus compared to 2015? Could another elite firm raise bonuses, prompting Cravath to reconsider? I feel like this has happened in the past.

Lat: It’s possible that another firm could go above Cravath, as Davis Polk bested Simpson back in 2014, but I doubt it. This year was strong for law firms, but last year was generally better, especially in terms of big-ticket M&A work that drives the profitability of Cravath and other top-tier firms. Also, given the political and economic uncertainty we’re experiencing right now, I think firms would prefer to be conservative.

[caption id="attachment_6251" align="alignleft” width="263"][Image “Courtesy of Above the Law” (src=https://bol.bna.com/wp-content/uploads/2015/12/david-lat-e1450216896135.jpg)]Courtesy of Above the Law[/caption]

Big Law Business: It must be tough to complain about bonuses ranging from 15K to 100K, but could this be perceived a disappointment after Cravath raised base salary to 180K this summer with great fanfare?

Lat: I wouldn’t call this a disappointment at all — and the reader poll in our story shows that about three-quarters of associates are “pleased” or “very pleased” with these bonuses. Some associates feared that bonuses would get hit because of the base salary increase, which is something that firms other than Cravath raised as a possibility, so people were relieved when that didn’t happen.

Big Law Business: What have you heard in the market about bonuses this year? Any early signs about what to expect as other firms announce bonuses? Do you sense any surprises? Which firms are you closely watching and why?

Lat: Bonuses at these levels were widely expected — and I predicted this scale when I wrote about the Cravath pay raise back in June, for example. So I don’t expect too many surprises. I will be curious to see if Sullivan & Cromwell does spring bonuses, which it did back in 2011, although I’m not expecting that. I am also interested in seeing what Wachtell Lipton does and whether it goes about paying bonuses that are 100 percent of base salaries.

Big Law Business: How do law firms announce their bonuses typically? ATL seems to have a direct line to the bonus memos. Can you share any insight on what’s traditional every year and ATL’s role in rolling out this news?

Lat: Bonus news is a major story for our readers, many of whom are associates and partners at large law firms, and we gear up for it well in advance. Prior to today, we ran a few stories polling readers on their bonus expectations. We also draft the bonus announcement post in advance, knowing that it’s usually (but not always) Cravath who goes first, and that it’s usually (but not always) on a Monday afternoon in late November or early December. Then once our readers email us or text us with their bonus memos, whether Cravath’s or anyone else’s, it doesn’t take long for us to drop in the memo and publish.

Big Law Business: Any funny law firm bonus announcement stories/anecdotes you can share from your time reporting/writing?

Lat: Nothing super-hilarious comes to mind, but it is mildly amusing to see how small differences in compensation can be a big deal to lawyers, mainly because of lawyers’ obsession with status and hierarchy. Back in 2014, I was at the gym when I heard that Davis Polk announced bonuses that beat the then-prevailing Simpson Thacher scale — just for certain class years, and by just $5,000 to $10,000 per lawyer, depending on seniority. But I ran home and published my story, at almost 10 p.m., because I knew that it was — in this particular world — huge, breaking news. Hell hath no fury like an associate shortchanged!

More from Lat on the associate bonus and salary coverage, as well as the state of the legal market, in two 2015 Big Law Business video interviews below.

https://www.youtube.com/watch?v=VDUHOlDiKsk

https://www.youtube.com/watch?v=vR2sHSUPISs

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