More Associates' Salaries Are on the Rise

By Elizabeth Bennett
Delaware Law Weekly
New York Lawyer
April 21, 2006

In news that signals history might indeed repeat itself, the Wilmington, Del.-based firm of Morris, Nichols, Arsht & Tunnell announced April 11 that it was raising first-year associate salaries to $135,000 effective last Saturday.

On the same day, Young Conaway Stargatt & Taylor of Wilmington also announced it was raising first-year associate pay to $135,000, effective last Saturday. Both firms boosted the first-year level by $10,000.

The last wave of substantial pay hikes among Delaware-based firms was back in the summer of 2004. Then as now, Morris Nichols led the charge, though it remains to be seen if more firms will follow suit.

While not at the highest level in town, Morris, James, Hitchens & Williams of Wilmington said it wouvld increase its first-year pay to $120,000 in September.

At press time no other Delaware-based firm had announced a pay hike, although Fish & Richardson, a national firm with a satellite office in Wilmington, announced in March that it was raising its first-year pay to $135,000 firmwide, retroactive to January.

All three of the firms in the $135,000 club said more experienced associates would also see higher salaries. Morris Nichols indicated it was raising salaries commensurately across the board. Young Conaway intended to award increases in base pay on a per-lawyer basis, and Fish & Richardson said it would now pay its second-year associates $145,000, up from $140,000.

These hikes make all three the highest-paying firms in Delaware, at least for first-years, with the exception of Skadden, Arps, Slate, Meagher & Flom, a large international firm whose pay is higher than all but a few big players. Skadden Arps pays its first-year associates $140,000.

"Every day we hear of more firms increasing their salaries," said Brenda Thompson of Thompson Search Consultants, a legal recruiter in Delaware.

"Once one firm increase its salaries, others do the same," she said. "For people coming out of school, it's really important for them to get a decent salary."

Other issues like benefits, work-life balance and the level of responsibility become more important in later years, when young lawyers have more of a handle on their debt load.

Thompson also said many firms increased their hiring rates, creating a classic supply-and-demand scenario. She added she wouldn't be surprised if many more firms push up their pay.

In the last wave of salary hikes, "the Delaware firms were increasing their salaries, and then the branch offices increased theirs," Thompson said. "The local firms took the lead in that."

Rodger D. Smith, hiring partner at Morris Nichols, said his firm made the move in order to "remain competitive for the top law students. The competition that we face isn't just other Delaware firms. We are continually competing against Philadelphia firms, D.C. firms and New York."

Although the cost of living is certainly lower in Delaware, Smith said that is beside the point.

"If you want to attract top people you have to show them that your firm is at a certain level," he said. "It's a signal as to who you are and what the level of practice is. ... By paying less you would signal that the level of practice in your city is not on par. It's a clear signal when we are paying $135,000, the same as top firms in Philadelphia and D.C."

Jim Patton, chairman of Young Conaway, said his firm made its move because it was clear that similar firms were evaluating whether to raise associate salaries.

"We asked ourselves that question and decided it was time for a raise to continue to attract the best and brightest associates," he said.

Patton added that the timing -- being the same as Morris Nichols -- was coincidental and that salary hikes have been in the news for the last two or three months.

"We compete with Philadelphia firms." Patton said, "This was obviously something we were going to do."

The legal press has been covering similar activity in other cities. James D. Cotterman, a principal with legal management consulting firm Altman Weil Inc. in Newtown Square, Pa., said pay hikes have gotten the most attention in California and along the East Coast.

Over the past few months, publications from ALM, Delaware Law Weekly's parent company, have noted pay hikes in Los Angeles, Chicago, Houston, Atlanta, New York and Philadelphia.

In February, four New York firms increased their first-year pay to $145,000; New York is generally the highest-paid market, in no small measure because of the cost of living, Cotterman said.

Also in February, Morgan, Lewis & Bockius of Philadelphia boosted its first-year pay to $135,000. Dechert followed suit in early March.

Since the beginning of the year other Philadelphia firms raised their first-year pay to $125,000, including Schnader Harrison Segal & Lewis and Buchanan Ingersoll.

Although Cotterman is skeptical about herd mentality at law firms and sees salary hikes as more a function of the economy, he does think that Delaware is more influenced by the big firms than other markets its size.

"Delaware has a unique position because it's the jurisdiction where most of the public companies are going to incorporate," Cotterman said.

The latest available research from Altman Weil does show that lawyers' salaries at Delaware's larger firms easily make the 90th percentile.

According to Altman Weil's 2005 Survey of Law Firm Economics, the median associate starting salary of firms in the 90th percentile with more than 150 lawyers was $122,760. For firms with 76 to 150 lawyers, the figure was $112,200, and for firms with 41 to 75 lawyers the median was $89,000.

The figures are creeping up this year, prompting some to wonder how law firms are going to pay for all this.

Morris Nichols takes the additional costs into account, Smith said, and does not intend to pass it on to clients.

"Obviously, we're in business here. An increase in costs goes into our profit and loss statement, but it's not something we think we can just pass on. That's not the way we do business."

Patton said periods of time in which law firms fight each other for talented associates also tend to be times law firms have more work than they can handle, and money becomes less of an issue.

The roughly two years that passed between substantial salary increases in Delaware wasn't the shortest period ever, nor was it the longest, Patton said.

"It's a function of a variety of things. To some extent it's as simple as what the marketplace is doing in terms of competition for talented associates. A law firm has to pay attention to those forces," Patton said.

The legal marketplace is robust, as this latest round of hikes indicates, he said.

"It signals we're in a period of increasing demand for legal work among the larger firms."

As for the next firm to join the $135,000 club, Patton would not speculate: "If past is prologue, we will see."

Litigation Boutique Pays Salary-Equaling Bonuses

By Brenda Sapino Jeffreys
Texas Lawyer
New York Lawyer
April 20, 2006

Gibbs & Bruns, a 34-lawyer litigation boutique in Houston, recently set a high bar for associate bonuses by paying bonuses to its 10 associates that are at least as large as their yearly base salary.

Those bonuses were paid to the associates over the past year, but the firm paid a big chunk of the money April 13, in the wake of two large litigation settlements finalized during the week of April 10.

The firm has had a good run of settlements during the past 12 months, with settlements exceeding $500 million. Partner Robin Gibbs says he cannot discuss the terms of the settlements. But partner Kathy Patrick confirms that the firm represents plaintiffs in the National Century Financial Enterprises multidistrict litigation (MDL), which is pending in the U.S. District Court for the Southern District of Ohio. The MDL consolidates a number of suits filed in connection with the bankruptcy of NCFE, a company that financed health-care receivables. In a recent 10-k filing, defendant JPMorganChase reported that it agreed in February to pay a total of $425 million to plaintiffs in the MDL.

Gibbs says Gibbs & Bruns has a policy to share the wealth with its employees, and that led to the bonuses paid last week.

"Each of our associates received a bonus at least equal to salary," Gibbs says.

Including the recent payment, Gibbs says senior associates have received as much as two times their salary in bonus payments over the past 12 months. Some were paid more than $300,000 in bonus money, he says.

Patrick says the firm pays out bonus money at various times of the year, not just at year end like many other firms.

"When we make money on contingent-fee cases, we share the wealth from Robin [Gibbs] right down to the newest employee," Patrick says. "We don't differentiate whether you worked on the case or not."

Gibbs says that, also on April 13, staff at the firm received bonuses equivalent to several months' salary.

Gibbs says the recent run of settlements has been extraordinary.

"It's a big deal for us to have had this good of a year," Gibbs says.

In the meantime, Gibbs says the firm is looking at its associate salary scale in the wake of increases adopted by many of Texas' largest firms in recent weeks.

He notes that the starting base salary for first-year associates at Gibbs & Bruns has been $127,000 since 1999. The new, higher market base salary rate for first-year associates at large Texas firms is around $135,000.

Last December, 76-lawyer Susman Godfrey, another litigation boutique, paid year-end bonuses to its associates ranging from $86,000 to $150,000.

At the time, partner Stephen Susman said the bonuses were paid because the firm's financial performance for the year was second only to its best-ever results in 2004. The Susman Godfrey bonuses averaged 75 percent of each associate's base pay.

Two Firms Boost Associate Base Pay, Others Eye Match

By Marie-Anne Hogarth
The Recorder
New York Lawyer
October 3, 2005

While it may not produce the salary war spurred by the dot-com boom, base pay hikes at two regional law firms may signal a break in the stagnant salary stretch endured by California associates in the past five years.

After Irell & Manella announced last month that it would raise next year's first-year associate salaries by $5,000, Quinn Emanuel Urquhart Oliver & Hedges was quick to follow with a match.

The two firms, now both offering $135,000 to first-years, are somewhat unique in that they will be paying about $10,000 more than other California firms, according to a recent Recorder salary survey.

While the Recorder's salary survey shows most big national firms paying first-years a base of $125,000 with variable bonuses, there are, of course, exceptions.

Skadden, Arps, Slate, Meagher & Flom, a Wall Street shop, pays $140,000 to first-year associates in its California offices. Littler Mendelson pays a base of $115,000 in San Francisco.

While no one is expecting a repeat of the fast and furious salary wars of the dot-com era, many have noticed changes in the hiring market, underscoring the importance of the raises at Irell and Quinn Emanuel.

Arthur Shartsis, from San Francisco-based Shartsis Friese, believes that some of his top-tier competitors, firms that include O'Melveny & Myers; Gibson, Dunn & Crutcher; Latham & Watkins; and Morrison & Foerster, will likely increase first-year compensation by $10,000, to $135,000, be it through adjustments in base pay or bonus structures.

Meanwhile, some firms are studying their options. Latham & Watkins; Keker & Van Nest; Sheppard, Mullin, Richter & Hampton; Cooley Godward; and Heller Ehrman are discussing the pay raises at Irell and Quinn Emanuel, saying they wish to "remain competitive."

Two More Firms Move to Raise Starting Salaries

By Jeff Blumenthal
The Legal Intelligencer
New York Lawyer
February 1, 2005

Two more Philadelphia law firms have decided to raise starting salaries to $115,000 annually. Buchanan Ingersoll and Stradley Ronon Stevens & Young announced their decisions in the past week, making it 12 firms that have raised their wages for first-year entry-level associates in the past several months.

Buchanan Ingersoll had been paying $105,000 a year to new associates, but Philadelphia office managing partner Howard Scher said the market shift made the firm rethink its situation.

"We have clients who want first-class legal representation, so we have to compete for the best people," Scher said. "While I don't think that $5,000 or $10,000 should be the basis for making a career decision, it is for people at that stage of their careers. So we hope this shows law students that Buchanan Ingersoll is a first-class firm."

Buchanan Ingersoll initiated the raises to $115,000 immediately in its Philadelphia, New York, Washington, D.C., and Wilmington offices but all other offices -- including its Pittsburgh home base -- will pay $110,000. Scher said the firm will pay for the raises from its partner profits and not through increasing associate billable hours requirements or billable rates for clients.

Scher also said the firm wanted to avoid "compression" in pay differences among associate classes, so it also increased salaries for experienced associates. When asked if those increases matched the $10,000 hike for first-years, Scher said he was not certain but that there would be a discernable difference between the salary levels for each class.

At Stradley Ronon, new managing partner Jeffrey Lutsky announced the increases Friday to the firm's associates. The 140-attorney Stradley Ronon has traditionally lingered behind other large firms when it comes to salary. Its starting salary had previously been set at $102,000, slightly below the old standard of $105,000.

Lutsky declined to reveal the firm's profits per equity partner or revenue per lawyer but did say they were competitive with those of the firms that now pay their associates $115,000. So he said it only seemed natural to pay its associates that kind of money.

Firm Sweetens Associate Bonuses

By Marie-Anne Hogarth
New York Lawyer
January 20, 2005

Wilson Sonsini Goodrich & Rosati announced Wednesday that the firm would increase associate bonuses for 2004.

The firm's annual merit bonuses for its 430 associates will range from $12,000 to $45,000.

By contrast, bonuses for 2003 ranged from $4,000 to $35,000. In 2002, bonuses ranged from $2,500 to $30,000.

Donna Petkanics, Wilson's managing partner, said that quarterly bonuses based on attorney productivity were also increased by about 20 percent.

Combined, the greatest potential bonuses at Wilson range from $28,000 for a first-year associate to $80,000 for an eighth-year associate.

Petkanics said that the firm's bonus plan and total compensation was competitive based on the firm's productivity last year.

By Marie-Anne Hogarth
New York Lawyer
January 20, 2005

Wilson Sonsini Goodrich & Rosati announced Wednesday that the firm would increase associate bonuses for 2004.

The firm's annual merit bonuses for its 430 associates will range from $12,000 to $45,000.

By contrast, bonuses for 2003 ranged from $4,000 to $35,000. In 2002, bonuses ranged from $2,500 to $30,000.

Donna Petkanics, Wilson's managing partner, said that quarterly bonuses based on attorney productivity were also increased by about 20 percent.

Combined, the greatest potential bonuses at Wilson range from $28,000 for a first-year associate to $80,000 for an eighth-year associate.

Petkanics said that the firm's bonus plan and total compensation was competitive based on the firm's productivity last year.

              Firms Offer Big Raises, Just in Time for the Holidays

By Jeff Blumenthal
New York Lawyer
The Legal Intelligencer
December 1, 2004

Three more Philadelphia law firms have joined in the parade to raise starting salaries. Hangley Aronchick Segal & Pudlin and Saul Ewing both moved their starting wage from $105,000 to $115,000, and Fox Rothschild will jack its rate from $100,000 to $110,000.

Six other firms -- Ballard Spahr Andrews & Ingersoll, Blank Rome, Duane Morris, Pepper Hamilton, Reed Smith and Wolf, Block, Schorr and Solis-Cohen -- raised their salaries to $115,00 earlier this fall while Cozen O'Connor moved up to $110,000. Dechert and Morgan, Lewis & Bockius had already established a starting salary of $125,000 two years ago while Drinker Biddle & Reath moved to $115,000 soon after.

Hangley Aronchick managing partner David Pudlin said the decision was made so that the firm could be competitive in the entry-level recruiting process. But he added that all of the firm's associates will receive $10,000 raises. The move, implemented by the firm's five-person board of directors, will take effect Jan. 1.

Saul Ewing Chairman Stephen Aichele said the market shift also precipitated the increase at his firm, which will also take effect in the new year. Like Hangley Aronchick, all Saul Ewing associates will receive $10,000 raises.

"It's been a while but the marketplace has changed and we can't afford to be left behind," Aichele said. "This is not only for recruiting but also to keep our existing associates."

Fox Rothschild managing partner Abraham Reich said the move to $110,000 -- which kicks in early next year -- will keep the firm competitive with its large-firm brethren. He said while there will be some ripple effect on the firm's more experienced associates; not all of them will receive $10,000 raises. He did say the firm will focus on its merit-based bonus program to supplement base salary.

Several other firms are still pondering their next move. Montgomery, McCracken, Walker & Rhoads Chairman Steve Madva said the firm will almost certainly raise its starting salaries from the current $105,000, but the management team is still debating to what degree. Stradley Ronon Stevens & Young Chairman William R. Sasso indicated the same but added that it would not be implemented until September 2005. Both Buchanan Ingersoll and Schnader Harrison Segal & Lewis are still plotting their respective courses of action.

Some Firms Raise Pay, While the Rest Watch and Wait

By Leigh Jones
New York Lawyer
The National Law Journal

October 13, 2004

While last week's announcement of hefty interim bonuses at one of New York's largest law firms——coupled with word of pumped-up first-year pay at four Philadelphia firms——may be an indicator of good things to come for associates, it does not yet appear to be inspiring copycats.

Sullivan & Cromwell announced it is giving first-year associates $10,000 and its senior associates $20,000 as interim bonuses. At the same time, three Philadelphia-based firms —— Pepper Hamilton, Ballard Spahr Andrews & Ingersoll and Duane Morris —— and a fourth with a large Philadelphia office, Reed Smith, decided to boost starting pay to $115,000.

Although an announcement of increases in associate salaries by one or two of the country's top firms historically sets off a game of follow-the-leader among competing firms on both coasts, many appear to be proceeding with caution——at least for now.

New York's Cravath Swaine & Moore, with 471 attorneys, said it would wait until the end of the year to make a decision about whether to increase salaries, according to presiding partner Robert Joffe. Cravath Swaine and New York's Skadden Arps Slate Meagher & Flom directly compete with Sullivan & Cromwell. The three firms, and many others, in the past have raised their salaries based on what other big shops do.

Earle Yaffa, Skadden's managing director, said that he expects Sullivan's move to have little effect on his firm's salary decisions.

On the West Coast, John J. Clair, managing partner of Latham & Watkins, said that he was not aware of any changes in salary or bonuses for associates in his 283-attorney Los Angeles office.

At the same time, global giant Baker & McKenzie said it did not detect an industry swing toward higher associate pay. "We don't have anything to support a trend in increasing salaries or bonuses," said firm spokeswoman Pamela Ulijasz.

Despite the caution, Sullivan & Cromwell's announcement could mark an end to a reining in of associate pay in recent years. During the dot-com binge of the late 1990s, annual starting pay at top firms hit $140,000. Firms entered the wage war to keep associates from defecting to Internet startups and investment banks.

                            Four Philadelphia Law Firms Raising Entry-Level Salaries

Jeff Blumenthal
The Legal Intelligencer
October 5, 2004

In just a matter of hours Monday, the landscape of associate pay at Philadelphia's large law firms shifted dramatically. Four firms announced they would move entry-level salaries to $115,000, while several others said they would consider whether to match in the coming months. Pepper Hamilton kicked off Monday's festivities by announcing that it was moving from $107,000 to $115,000, effective Jan. 1.

And after being informed by The Legal Intelligencer Monday about the changes at Pepper Hamilton, Ballard Spahr Andrews & Ingersoll -- which only a week earlier moved from $107,000 to $110,000 -- announced an increase to $115,000, effective in January.

Reed Smith announced that it had decided to move from $110,000 to $115,000 in January in Philadelphia and Wilmington.

Duane Morris also quickly joined in on the fun when Chairman Sheldon Bonovitz announced the firm would raise starting salaries to $115,000, effective Jan. 1.

Previously, effective Sept. 1, Blank Rome had moved their entry-level salary from $110,000 to $115,000, joining Drinker Biddle & Reath -- which has been at that number for over a year in addition to a $10,000 bonus for first-years.

Firm managers at Wolf Block Schorr & Solis-Cohen, Schnader Harrison Segal & Lewis and Saul Ewing all said they would consider salary changes at their upcoming budget discussions. Pepper Hamilton executive partner Robert Heideck said that the decision from the associates committee was made late last week after discussing it for several weeks.

"When Morgan Lewis [& Bockius] and Dechert moved to $125,000 a few years ago, we didn't feel we needed to do anything because the rest of the market stayed at around $115,000," Heideck said. "But we felt that the market was going to start shifting, so we wanted to be proactive and make a change to $115,000."

Heideck said most other associates will receive raises covered by the increase in entry-level salaries, while some senior associates might receive raises based on performance. Heideck said most other associates will receive raises. He said the only reason he hesitated was that some senior associates might receive merit-based raises as opposed to raises equal to those being given to entry-level associates.

"I think the raises for the first several years will be very consistent," Heideck said.

Heideck added that the bonus program, which includes a combination of merit and billable hours components, will not be changed. He added that associates would not be asked to bill more hours to foot the bill, nor would the firm institute billing rate hikes to clients for the purpose of paying for the raises.

"We set our billing rates according to the market," Heideck said. "I would think this will come from [partner] profits. We'll raise billing rates as we normally would."
The Pepper Hamilton raises affect the Philadelphia, Princeton, Great Valley, Wilmington and Pittsburgh offices. Heideck said that associates in the Washington, D.C., Detroit and Harrisburg offices will receive raises more suited for those markets.

Ballard Spahr adjusted its starting wages on the fly Monday. Last week, the firm announced various changes to its associate compensation structure, including an increase in the starting salary in Philadelphia to $110,000. But Ballard Spahr professional personnel partner Geoffrey Kahn said that when the firm learned Monday that two of its Philadelphia competitors had joined Drinker Biddle at $115,000, it felt compelled to join them.

"We just wanted to remain competitive in attracting the best talent," Kahn said.

Ballard Spahr Chairman Arthur Makadon said that the firm will not pay for the increases by making associates bill more hours or by jacking up billing rates. He said the money will come from increasing business development and partner profits.

Kahn said the increase will be passed through to all associate classes -- i.e., there will be no compression between classes. In addition, he said that plans announced last week to double the amount of money allocated to the associate bonus program will not be altered. He said that roughly half of the firm's associates receive some kind of a bonus. Ballard Spahr associates qualify for the bonus program on merit but can receive additional money for business generation or billable hours worked.

Both the Philadelphia and Wilmington offices will move their salaries from $107,000 to $115,000; Voorhees, N.J., will move from $102,000 to $110,000; and Washington, D.C., will move from $111,000 to $122,500.

Like Ballard Spahr, Reed Smith had recently increased salaries in Philadelphia and Wilmington to $110,000 only to add another raise to $115,000 -- effective Jan. 1 -- in the past few days due to the changing competitive market. The firm will also offer a $5,000 bonus to first-years contingent on meeting a standard of 1,900 annual billable hours.

Reed Smith Philadelphia hiring partner Tracy Frisch said the firm would also institute raises for all other associates, though not necessarily proportional to the entry-level ones.

Duane Morris' Bonovitz said more experienced associates will not necessarily receive proportional raises but that the entry-level increases will be factored into associate compensation for next year. Associates can earn between $5,000 to $25,000 in bonuses that are based on merit and billable hours.

Bonovitz said that there will be no increase in billable hour requirements and no unusual increase in billing rates for clients to foot the bill for the raises.

"The landscape changed, so we opted to move up," Bonovitz said. "Even at $105,000, we would have been competitive [with firms that have higher starting salaries] because of our bonus plan. But you can't be at $105,000 while your competition is at $115,000, especially during hiring season. You don't want law students reading that, not to mention our own associates."

All of these firms could be joined at $115,000 by Wolf Block, Saul Ewing and Schnader Harrison, each of which said they would be holding budget discussions in the coming months and would make a decision on salaries by the beginning of next year. Cozen O'Connor just increased its starting salaries from $100,000 to $110,000 and its managing partner, Tad Decker, said the firm was comfortable at that number for the time being.