Cravath Swaine & Moore and Paul Weiss Rifkind Wharton & Garrison have upped the ante in the annual associate bonuses contest, announcing that they each will hand out up to an additional $140,000 to certain attorneys before the end of the year.
Cravath was first to announce a pair of bonuses Monday evening, followed by Paul Weiss.
Cravath and Paul Weiss’ bonus announcements come at the end of a year flush with uncertainty as the coronavirus pandemic continues to spread. Many law firms in the spring turned to salary cuts, furloughs, and some staff layoffs in order to withstand the pandemic’s potential economic impact.
The number of firms that chose to match Cravath’s scale could be considered a barometer for how some firms have weathered the pandemic.
Cravath’s year-end bonus scale will range from $15,000 for first-year associates to $100,000 for its most senior associates. Cravath’s compensation and bonus scale has traditionally been the marker for top law firms.
But this year the firm, along with Paul Weiss, is also adding a second associate bonus matching the pay scale of the fall bonuses announced in September by fellow Wall Street firm Davis Polk & Wardwell.
These special bonuses range from $7,500 to $40,000 based on the associate’s tenure at the firm. Davis Polk and several other firms handed out fall bonuses to reward associates for hard work during the coronavirus pandemic.
At the time, Cravath, along with the likes of Kirkland & Ellis and Paul Weiss, all declined to pay out fall bonuses.
Both Cravath and Paul Weiss will pay out both their year-end and special bonuses on Dec. 18.
Milbank got associate bonus season started last year, announcing at the beginning of November that its associates would receive bonuses ranging from $15,000 to $100,000. Other firms jumped to match the scale.
Though Cravath and Paul Weiss have set a new total bonus high, they did not strike first with end-of-year bonus announcements.
Baker McKenzie, which in April instituted 15% pay cuts for its U.S. lawyers and high-paid staff, was the first Big Law firm to announce. The firm hit last year’s end-of-year bonus scale of up to $100,000, but noted that it would match any increases in the market should they happen.
‘All Over the Place’
Despite initial concerns about the financial effects of the coronavirus pandemic, most firms had a far better year this year than they thought they were going to have back in March or April, said Kent Zimmermann, a strategic advisor to law firms at the Zeughauser Group.
Some firms will outperform their 2019 numbers, with some projected to have double-digit growth on revenue and profits, he said. Many of the firms that instituted Covid 19-related pay cuts have restored pay either in part or completely to partners, as well as associates and staff.
Associates have also been extremely busy across the board, much more so than in years past, said Summer Eberhard, managing director of the associate practice group at Major Lindsey & Africa. Summer said she’s heard of associates tallying total billing hours in the mid-2,000s.
The boom has created a competitive market for sought after attorneys at all levels and compensation to match.
“Given that the market is so competitive, I’d be very surprised if the firms performing with the greatest strengths don’t try and develop a talent advantage,” Zimmermann said.
Several Big Law firms issued special bonuses in the fall to reward their associates for their work during the pandemic. Cooley announced special “appreciation bonuses” ranging from $2,500 to $7,500, depending on associates’ tenure at the firm.
Davis Polk, which in early September announced it would move to a modified lockstep compensation model, then pushed its special bonuses as high as $40,000.
Akin Gump Strauss Hauer & Feld, Debevoise & Plimpton, Latham & Watkins, Shearman & Sterling, Simpson Thacher & Bartlett, Sullivan & Cromwell, Weil Gotshal & Manges, and Willkie Farr & Gallagher also followed suit issuing special bonuses.
Some in-house lawyers have expressed concern that as these big firms’ clients, they will eventually be asked to pick up the tab for those payouts.
But as law firms announce their year-end bonuses, the ranges could potentially be as varied as the measures law firms took to ensure their cash-flow in the early months of 2020.
“I think because you saw so many different actions taken in the beginning of the pandemic, we’re going to see bonuses all over the place because you’re going to have some firms that cut compensation that are going to feel like they need to true up their attorneys over the course of the year on top of giving them end-of -year bonuses,” said Eberhard.
Though compensation decisions will hinge on how year-end revenues look, Eberhard added that firms will be hard pressed not to meet the market for year-end bonuses “when they’re having a gangbuster year.”