KM2016 wrote:Anyone else think it's going to be an exciting week seeing which firms decide to match STB/PW/Cleary?
Hoping for a bidding war!
There is a 0% chance of a bidding war. Market has been set and matched by three firms.
However I do think there's a better shot than not that bonuses go up even more next year, as firms break rank to get the accolade of being a compensation leader (Like STB or S&C or Skadden have gotten in the past).
The cluelessness in this thread re: bonuses is sort of amusing.
So - bonuses. For the top tier firms, the extra bonus comp is basically a rounding error. Take the Simpson bonuses - they come out, mas or menos, an extra $20-25k in comp per associate on a blended average basis, and they're weighted toward the most profitable (i.e. senior) associates. Say a typical big firm structure with ~4-1 leverage, that comes out to a $100k hit per partner. To be frank, that's like one big M&A deal. If the only consideration were attracting and retaining associate talent, bonuses would be way higher.
Alas, that's not the only consideration. The other issue is that everyone want(ed) to keep their heads down. There was a lot of worry about the big firms getting roped into the same populist approbrium that's been blasted at the big banks, PE firms, hedge funds. There was a lot of worry about clients barking at billing rates when they saw gaudy bonus numbers. I have a family member who's a partner at a top firm, and he told me there was a big debate among the partnership multiple times since 2007 re: raising bonuses, and the effect on partner comp didn't even enter the picture - it was a pure question of recruting edge v. reputational and billing risk. And since everyone sees bonuses as a prisoners dilemma anyways, query the value of the recruiting edge.
What I'd heard is that, at least at this top firm, the thinking was that at some point the top 10-15 firms or so would break away in bonuses from everyone else. No one has had the guts to do it yet but it's just a matter of time - maybe this STB move will do it. A $100K hit to partner comp is not a big deal when most partners are pulling in $2M plus, but it is
a big deal at firms down the chain, especially firms with big deltas between the top earners and the partner plebs - those firms have a lot of partners earning six figures, who can't take that hit.
So what drove the bonus move now? I think (a) die-down of political risk from higher bonuses (the banks have started raising bonuses first); (b) increases in in house comp for senior M&A associates in top groups - folks can leave now without taking that much of a comp hit, even seeing raises if they go to PE firms in legal M&A roles; (c) tight lateral market for finance associates, particularly firms with lower PPP drawing away finance associates from the top firms.