Archive for the ‘Compensation’ Category

Merit pay for associates - or not

May 17th, 2011 by Altman Weil

Leigh Jones at Reuters has written an in-depth story on the fate of merit pay for associates.  Among the stumbling blocks firms have encountered are inertia, administrative hassles, a potentially negative impact on recruitment and morale, as well as the basic bottom-line issue - no real savings have been realized.

“Back in 2009, a small group of major law firms announced that they were abandoning “lockstep pay” for associates in favor of merit-based salaries and bonuses. Out went the traditional practice of paying junior lawyers simply based on the year that they started. Into its place came evaluations by supervising partners who rated such factors as professional and interpersonal skills and client services.

DLA Piper and Orrick, Herrington & Sutcliffe were among the converts. So was Wilmer Cutler Pickering and Hale and Dorr. The firms argued that the new system would increase efficiency and allow them to more accurately reward the best associates. They also expected the move would appeal to clients concerned they were footing the bill for associates’ bonus pay, which typically is pegged to hours charged to clients. Given the history of law firms’ copycat behavior, lawyers believed that many other firms would follow suit.  So far, it hasn’t happened.”

Read it at Thomson Reuters News & Insight 

Spring bonuses for associates

March 23rd, 2011 by Altman Weil

Sullivan & Cromwell started a mini-trend this spring by giving associates an extra bonus on top of the traditional year-end payout.  Law360 has a story today that suggests some reasons why, including:

  • A sign of the legal industry bouncing back and workloads increasing
  • A balancing out after the lean years of the recession
  • A way to retain talent in a hot lateral market

Will we see spring bonuses next year, or is this a one-time thing?  Altman Weil’s Jim Cotterman thinks it’s most likely an anomaly:

“The advantages of the spring bonus are better knowledge of the firm’s financial results, individual performance for the year and market conditions,” Cotterman said. But spring bonuses also mean paying associates in the current year for their performance the previous year. “Unless the firms find themselves in a situation similar to this year, I believe they will most likely prefer sticking to the year-end bonus.”

Read it at Law360 (free registration may be required)

Partner compensation and lateral hiring

February 11th, 2011 by Altman Weil

 The AmLaw Daily interviewed Altman Weil principal and legal industry expert Ward Bower to discuss the hot lateral market and other industry trends.

“Nearly six weeks into 2011, partner compensation and group lateral moves are the early buzzwords on the lips of legal industry observers.  Both issues were front and center in The Wall Street Journal on Tuesday in a report about the huge sums of money being paid by law firms in the major markets–New York, Chicago, Los Angeles, and Washington, D.C.–to lure top rainmakers who earn as much as $10 million. In some cases, partner compensation is being reduced in order to free up capital for these larger payouts, and the gap in pay among a firm’s equity partners is growing. These “star attorneys,” The WSJ reports, can make eight to nine times more per year than their fellow partners.”

“With the lateral market heating up, and Am Law 100/Second Hundred reporting season well underway, we reached out to Ward Bower, a principal at legal consulting firm Altman Weil, to discuss partner pay and the hiring frenzy.”

Read it at the AmLaw Daily

In-house lawyer compensation

January 31st, 2011 by Altman Weil

Tons of good info from the 2010 Law Department Compensation Benchmarking Survey from Corporate Counsel.

“… in 2010 chief legal officers saw a median salary of $341,300. Salaries in the ALM survey ranged from a lower quartile (median of the lower half) number of $278,200 to $501,500 in the ninth decile (90th percentile). Moving one rung lower on the food chain, we have the deputy chief legal officer, who saw a median salary of $241,400 and a range of $201,600 in the lower quartile to $315,900 in the ninth decile.”

“Moving on to the non-management positions… All five positions in that category took a hit this year, with the ‘attorney’ position faring worst at an adjusted salary trend of -7.5 percent. High-level specialists saw a drop of .6 percent, with a median salary of $169,900, as well as $147,200 in the lower quartile and $208,300 for the ninth decile.”

“Rounding out the in-house salary report was the recent law school graduates, who made a median salary of $64,100. The salaries in that group ranged from a lower quartile mark of $62,000 to a $100,000 ninth decile.”

This is a seven-part series (so far), so interested readers can follow an array of links to learn a lot more including industry and regional data.

Read it at Corporate Counsel

Law firm partner compensation survey

January 10th, 2011 by Altman Weil

Recruiting firm, Major, Lindsey & Africa (MLA) has released a big, new survey on law firm partner compensation. The Survey was sent to more than 30,000 law firm partners in June 2010 and received 1,873 responses from equity and non-equity partners in more than 25 practice areas, 56 cities, open and closed compensation systems and lockstep and non-lockstep firms.

They report these highlights:
• Average compensation for all respondents was $640,000; Equity partners averaged $811,000 in compensation, versus $336,000 for Non-Equity partners.
• Among the seven practice areas highlighted in the Report (Litigation, Corporate, IP, Labor and Employment, Real Estate, Tax/ERISA and Other), Labor and Employment partners reported average compensation of $470,000, compared to a high of $759,000 for Corporate partners.
• Partners in Open compensation systems reported nearly 50% higher average compensation ($718,000) when compared to partners in Closed ($495,000) and Partially Open ($513,000) systems.
• IP partners were most likely to classify themselves as Very Satisfied, whereas Labor and Employment partners were least likely. Tax/ERISA partners showed the highest level of overall compensation satisfaction, and Real Estate partners demonstrated the highest level of overall dissatisfaction with their compensation.
• 40% of respondents attributed their lack of compensation satisfaction to cronyism, which represented a greater percentage than all other specifically enumerated reasons combined.

MLA has made the entire survey available to download on their website

Read it at Major Lindsey & Africa

Lawyer comp outlook

December 13th, 2010 by Altman Weil

Altman Weil’s Jim Cotterman gives his forecast for lawyer compensation in the current economy…

“The 2010 NLJ Billing Rate Survey results indicate a 2.7% increase over 2009.  This is a significant departure from pre-recession increases.  But it is roughly consistent with inflation, which may offer some measure of solace.

In the past, rate increases alone were sufficient to largely fund increased compensation levels.  Absent rate increases, lawyers will need to work harder (more billable hours), work more efficiently (better realization), and discount less (also better realization) to fund equivalent pay hikes.  How likely are each of these?”

Read it at Cotterman on Compensation

Associate bonuses 2010

November 10th, 2010 by Altman Weil

Law 360 talked to a number of industry experts on associates’ prospects for year end bonuses, and concluded:

“While most associates can still expect to collect a bonus this year, it would be wise to ground dreams of $40,000 windfalls in the reality that law firms are now more fiscally conservative and might pay only a small fraction of that amount, or in some cases nothing at all, according to experts.

Although the legal industry has experienced a rebound of optimism in 2010, and some major firms could pay out end-of-year bonuses as high as $20,000, experts cautioned that other firms — still erring on the side of caution after the recession — may be planning to overlook bonuses altogether.”

Altman Weil comp guru Jim Cotterman weighed in on how new merit-based associate comp models affect bonuses.

“The new merit-based models that many firms adopted during the recession has injected a great deal of uncertainty as to the size of those bonuses, said Jim Cotterman, a principal at Altman Weil.”


“Some firms that moved to the merit-based structure made their salaries more conservative in turn, Cotterman noted, so a bonus could take on more significance for high-performing associates who are expecting to make up for the shortfall in their base pay.

“It’s going to be interesting” to see how it shakes out, he said.”

Read it at Law360