List of Salary-Cut Firms

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Anonymous User
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List of Salary-Cut Firms

Postby Anonymous User » Tue Oct 20, 2009 4:18 pm

Has anyone (or ATL and I just can't find it) compiled a list of firms that have implemented salary cuts?

Off the top of my head I know the list includes:
Perkins Coie
Dorsey Whitney
Reed Smith
Townsend and Townsend
MoFo (CA)
Holland Knight
Foley Lardner

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edcrane
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Re: List of Salary-Cut Firms

Postby edcrane » Tue Oct 20, 2009 5:34 pm

You can add chadborne to that list

thompson
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Re: List of Salary-Cut Firms

Postby thompson » Tue Oct 20, 2009 6:21 pm

Why anonymous?

*cue pitchforks and mob* Out him!

But to answer your question, just search on ATL by tag: --LinkRemoved--

ToTransferOrNot
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Re: List of Salary-Cut Firms

Postby ToTransferOrNot » Tue Oct 20, 2009 8:56 pm

This list is going to get a lot longer--as it should. None of us are worth $160k when we graduate.

AmicusCuriae
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Re: List of Salary-Cut Firms

Postby AmicusCuriae » Tue Oct 20, 2009 9:03 pm

ToTransferOrNot wrote:This list is going to get a lot longer--as it should. None of us are worth $160k when we graduate.


That really depends on your take on "worth." When your firms bills you out as a first year at $300/hr, and you bill 2000+ hours, you're generating some serious cash for the equity partners. Even if 1/2 of your time is written off, they are probably still making some money. The amount of time that gets written off is likely a function of your firm's culture and its clients tolerance for paying for first years. If you're lucky enough to be at a firm with clients who don't mind, you're probably bringing in a healthy profit for the firm, even after your $160k salary.

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RATRATRAT
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Re: List of Salary-Cut Firms

Postby RATRATRAT » Tue Oct 20, 2009 9:40 pm

ToTransferOrNot wrote:This list is going to get a lot longer--as it should. None of us are worth $160k when we graduate.


It's an investment.

ToTransferOrNot
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Re: List of Salary-Cut Firms

Postby ToTransferOrNot » Tue Oct 20, 2009 9:55 pm

RATRATRAT wrote:
ToTransferOrNot wrote:This list is going to get a lot longer--as it should. None of us are worth $160k when we graduate.


It's an investment.


It's a poor one.

Firms could offer a starting pay of $100k and fill their classes with precisely the same people they fill them with now.

Clients are demanding lower billing rates. Firms are experimenting with changes to fixed-fee, particularly in the transactional context. Pay is going to go down before partners are willing to take a shot to the PPP. And why shouldn't they?

I was one of the few who was lucky enough to receive an SA for this coming summer. The firm I landed with hasn't cut pay yet, and it may not at all (though that would surprise me.) However, if a firm comes to a point where it is deciding between large salary cuts (a cut from $160k to $145k is noticeable, but $145k is still a whole lot of money, and the firms could go much lower if they wanted to) and layoffs, give me the salary cut, every day of the week.

It isn't like prospective new associates are in a position to say "well screw you then, firm X, I'll just take a government job with lower pay, but lower hours to go along with it!" The jobs aren't there. The market is flooded with *experienced* biglaw associates who would take $100k a year in a heart beat--why should those of us who are coming in to it new make more?

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Kohinoor
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Re: List of Salary-Cut Firms

Postby Kohinoor » Tue Oct 20, 2009 10:38 pm

ToTransferOrNot wrote:This list is going to get a lot longer--as it should. None of us are worth $160k when we graduate.

I was worth 160k five years ago.

ToTransferOrNot
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Re: List of Salary-Cut Firms

Postby ToTransferOrNot » Tue Oct 20, 2009 10:46 pm

Kohinoor wrote:
ToTransferOrNot wrote:This list is going to get a lot longer--as it should. None of us are worth $160k when we graduate.

I was worth 160k five years ago.


Assuming you mean $160k a year, I hope that you really, really, really want to be a lawyer, to have given that up.

Also, that you were worth $160k a year doing whatever it is you did, doesn't mean you'll be worth $160k as a first-year associate.

Lowndes
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Re: List of Salary-Cut Firms

Postby Lowndes » Tue Oct 20, 2009 10:57 pm

I think most firms outside of New York will lower. I think very very few firms in New York City will. 160K in NYC isn't that much money especially with loans. Outside of New York it is a ton (in most markets and a good amount in the rest). Also, NYC attorneys bill more hours and at a higher rate, justifying slightly higher pay.

ToTransferOrNot
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Re: List of Salary-Cut Firms

Postby ToTransferOrNot » Tue Oct 20, 2009 11:13 pm

Lowndes wrote:I think most firms outside of New York will lower. I think very very few firms in New York City will. 160K in NYC isn't that much money especially with loans. Outside of New York it is a ton (in most markets and a good amount in the rest). Also, NYC attorneys bill more hours and at a higher rate, justifying slightly higher pay.


Don't kid yourself, 160k is a lot of money anywhere. People live on minimum wage in NYC, too. Not comfortably, but they do it--and so could someone with law school loans, considering IBR. It would suck, but don't try to diminish the fact that 160k is a lot of money.

That said, sure, I think attorneys in NYC should generally make more than attorneys elsewhere (though LA jousts with NYC as far as CoL goes,) and it wouldn't surprise me to see more firms in NYC stay at 160k then elsewhere. (I would be amazed, for example, if many Chicago firms stay at 160k.) Obviously, 160k in Chicago is a lot more than 160k in NYC, and 160k in Texas is a lot more than 160k anywhere else.

You need to keep in mind, though--the oversupply of lawyers is also sharpest in NYC. Again, they could post those same jobs for much less, and fill them with fully qualified people.

red_sox
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Re: List of Salary-Cut Firms

Postby red_sox » Tue Oct 20, 2009 11:16 pm

ToTransferOrNot wrote:This list is going to get a lot longer--as it should. None of us are worth $160k when we graduate.


None of us is worth ...

You're worth less to the firm with bad syntax!

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edcrane
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Re: List of Salary-Cut Firms

Postby edcrane » Tue Oct 20, 2009 11:18 pm

ToTransferOrNot wrote:
RATRATRAT wrote:
ToTransferOrNot wrote:This list is going to get a lot longer--as it should. None of us are worth $160k when we graduate.


It's an investment.


It's a poor one.

Firms could offer a starting pay of $100k and fill their classes with precisely the same people they fill them with now.


That would be shortsighted. While firms might be able to snap up current law students who are desperate for jobs, the quality of the best students would probably drop noticeably in the future. For those with other options, $180k of debt for a $100k job that requires 60 hours of work/week simply doesn't make sense.

ToTransferOrNot
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Re: List of Salary-Cut Firms

Postby ToTransferOrNot » Tue Oct 20, 2009 11:21 pm

Anonymous User wrote:
ToTransferOrNot wrote:This list is going to get a lot longer--as it should. None of us are worth $160k when we graduate.


None of us is worth ...

You're worth less to the firm with bad syntax!


The internets: where grammar on a message board is a huge deal :roll: Your ideas about the importance of message board grammar and the correlation between my worth to a law firm and my casual writing intrigue me, can I subscribe to your newsletter?

(Also, blatant abuse of the anonymous function.)

ToTransferOrNot
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Re: List of Salary-Cut Firms

Postby ToTransferOrNot » Tue Oct 20, 2009 11:28 pm

edcrane wrote:
That would be shortsighted. While firms might be able to snap up current law students who are desperate for jobs, the quality of the best students would probably drop noticeably in the future. For those with other options, $180k of debt for a $100k job that requires 60 hours of work/week simply doesn't make sense.


That argument has merit. I dispute it for the following reasons:

1.) Anecdotally, Howrey disagrees with you, and that is in an environment where they are one of only a very few firms going to the lower rate of pay.

2.) How many people really have options on the table that involve making over $100k? Edit: Further, I'm not exactly sure how much someone would need to make assuming no loans in order to make the equivalent of 100k with 180k in loans (or lower amounts--remember, many people who go to law school aren't even close to 180k in debt), but I would question how many people have options on the table that would look good from that perspective, as well. Remember, a large portion of people in law school don't have the most desireable undergrad degrees.

3.) Firms could always adjust the income levels in cirumstances where the market was more student-friendly (which is what caused the market biglaw rate to go up in the first instance.) I'm not saying a firm could drop to $100k and maintain that level indeffinitely, while still expecting to get the same quality of talent. However, given the *current* backlog, such a drop in pay would make sense for the next several years.

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Re: List of Salary-Cut Firms

Postby Anonymous User » Wed Oct 21, 2009 12:27 am

Why would you be advocating for this? Take the money while it's good and don't complain. Even though jobs are more sparse, there is still competition for the top students. If a firm cuts salaries by much they will hurt their recruiting efforts for top talent unless their peer firms follow. Sure, they can fill up the slots, but they will be sacrificing the caliber of students they can attract. Some firms are lowering their salaries because they can and still attract the same caliber law student, while other firms are keeping compensation somewhat the same (or only slightly less) because they are able to attract a HIGHER caliber student than in a good economy. Firms who never could get Harvard kids in a good economy are rolling with applications. Why not increase the quality of associates if you can? Increase your reputation long term. It's short sighted for firms to drastically slash salaries unless it becomes abundantly clear all firms will follow.

As of now, it does not seem that salaries will drop that drastically from current levels.

adamlippes
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Re: List of Salary-Cut Firms

Postby adamlippes » Wed Oct 21, 2009 7:49 am

...
Last edited by adamlippes on Thu Oct 29, 2009 5:52 pm, edited 1 time in total.

06072010
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Re: List of Salary-Cut Firms

Postby 06072010 » Wed Oct 21, 2009 8:16 am

ToTransferOrNot wrote:
Anonymous User wrote:
ToTransferOrNot wrote:This list is going to get a lot longer--as it should. None of us are worth $160k when we graduate.


None of us is worth ...

You're worth less to the firm with bad syntax!


The internets: where grammar on a message board is a huge deal :roll: Your ideas about the importance of message board grammar and the correlation between my worth to a law firm and my casual writing intrigue me, can I subscribe to your newsletter?

(Also, blatant abuse of the anonymous function.)


1) I don't know exactly what I'm worth, but it's more than 100k. I have a downward threshold where I would not work in biglaw. Am I worth 160k? I dunno -- firms are buying a) my degree b) my degree's reputation (whatever that means) and c) my upward potential skillset.

2) I don't buy into the forced grunt work mentality. I don't think young associates have to make their bones in due diligence and document review. We've all been in schools for 7-10 years. I think I can handle significantly more sophisticated work. Most of us can take complicated fact patterns, research the law, and make pretty solid legal recommendations. If we can't -- we're doing it wrong. Out of all the assignments I've taken after two summers, only one or two occasions stick out where I thought there was a strategic call I would not have found. It's those types of calls that partners and senior associates with experience in the business are useful. I really think I can be a value-add to a firm in ways other than the churn.

The grunt work is there not so we can make our bones, but because the leverage model calls for it. I don't know if the leverage model sticks around. I think it probably does, unfortunately, because profits for partners depends so heavily on it. Leverage is only risky if you give a fuck about laying off lawyers. If you don't, the leverage really isn't a risk. I'm not sure that's a great way to do business.

3) Agreed -- poster outed. Knock that shit off.

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edcrane
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Re: List of Salary-Cut Firms

Postby edcrane » Wed Oct 21, 2009 10:15 am

ToTransferOrNot wrote:
edcrane wrote:
That would be shortsighted. While firms might be able to snap up current law students who are desperate for jobs, the quality of the best students would probably drop noticeably in the future. For those with other options, $180k of debt for a $100k job that requires 60 hours of work/week simply doesn't make sense.


That argument has merit. I dispute it for the following reasons:

1.) Anecdotally, Howrey disagrees with you, and that is in an environment where they are one of only a very few firms going to the lower rate of pay.

2.) How many people really have options on the table that involve making over $100k? Edit: Further, I'm not exactly sure how much someone would need to make assuming no loans in order to make the equivalent of 100k with 180k in loans (or lower amounts--remember, many people who go to law school aren't even close to 180k in debt), but I would question how many people have options on the table that would look good from that perspective, as well. Remember, a large portion of people in law school don't have the most desireable undergrad degrees.

3.) Firms could always adjust the income levels in cirumstances where the market was more student-friendly (which is what caused the market biglaw rate to go up in the first instance.) I'm not saying a firm could drop to $100k and maintain that level indeffinitely, while still expecting to get the same quality of talent. However, given the *current* backlog, such a drop in pay would make sense for the next several years.


1. Fair point, but Howrey has never sought (or needed) the best of the best. The effect of a decline in student quality would disproportionately affect top firms, who seek to differentiate themselves, in part, by hiring those they perceive to be brilliant people.

2. Once you factor in lost income and risk premiums associated with attending law school (where there's a nontrivial risk of striking out, even at T14 schools), I think 60k/yr out of UG (likely < 50 hrs/week) is superior to $100k/yr w/significant debt.

3. Sure, but at the top firms there's a significant penalty for being a market leader in this regard.

ToTransferOrNot
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Re: List of Salary-Cut Firms

Postby ToTransferOrNot » Wed Oct 21, 2009 12:39 pm

In response to the "omg, just shut up and don't complain about the pay" guy--do you see me complaining about the fact that I'm going to be, in my mind, overpaid? I'm just making the observation that the list of firms lowering salaries is likely to grow, and that lowering salaries is justifiable for a variety of reasons. Not to mention, inflated salary (and the impact those salaries have on PPP, as well as the fact that they result in higher fees to clients) is one (among many) reason that we've seen so many no-offers to the C/O 2010, that ~ the class at even some T10 schools got nothing via OCI this year, and so on. Not entirely outside the subject matter of this thread, either.

Ed:

Fair enough--I'll agree with you that the very top (and most demanding firms)--the Wachtells, Skaddens, Kirklands etc. of the world, would probably suffer if they lowered thier base pay too much. More than likely, though, they could keep salaries where they are, but the other "market-level" firms could reduce their pay and still attract the same quality of students.

I think you may overestimate the number of 60k/year jobs available to people, even those who end up attending top law schools. How many of those jobs are really out there for the english majors, poli sci majors, philosophy majors, education people and so on, where you're looking at 60k starting, without having some kind of post-UG education requirement? I'm certainly not saying that you personally wouldn't have had other options (same for you, PK,) but I would be willing to bet that a larger portion of those at top schools couldn't have made 60k a year out of UG. Those who could probably have more significant undergrad loans (or had significant help from parents) too, which is something that shouldn't be overlooked.

There's also the possible upswing to consider--even if a firm lowers pay for a few years, practicing in a private firm probably has a higher salary upside than the 50k-60k/year jobs.

It's true that there would be a recruitment burn to being a market leader in cutting associate pay. That said, the cuts could be made during off-recruiting periods--now, for example. No one is going to turn down a permanent job offer from their 2010 SA gig because the firm they were with cut to 130k while some other firms did not, because they wouldn't have a shot at getting jobs in those other firms.

PK:

It is certain that there are some associates that are worth more than others. That's inherent in a lockstep system. I'm not saying that you're not worth more than $100k to a firm, all I'm saying is that, in general, a firm could find people to fill their positions for the next several years. Would you back out of the job you're starting next year if they announced they were dropping starting pay to $100k?

06072010
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Re: List of Salary-Cut Firms

Postby 06072010 » Wed Oct 21, 2009 3:00 pm

All things considered, I would back out of my firm if they started at 100k lockstep at NYC's COL. At that point, working PI or government for 60-80k in a market that has a lower COL would make way more sense to me. Even if I did stay, I'd look to bail as soon as possible for a more reasonable situation.

But I'm open to arrangements that start at 100k. I'm in favor of deep-sixing lockstep so long as lockstep is replaced with a merit system that is not based solely on billable hours. There are other metrics that can (and should) be used to determine associate pay. I'm pretty confident in my abilities, so I'd welcome a system where they actual evaluated my value to the firm. I'm knowledgeable enough to know that right now, I don't know jack shit, but given some time, I will start to add value to a firm fast.

The crux of my position is that I think the churn has to go. Clients get pissed at work for the sake of work. If I were a client, would I pay an associate 250 smackers an hour on the open market to do due diligence? I'm not sure. If clients aren't paying for "first-year" work, then I suggest that the definition of "first-year" work has to go. If I were a client and could pay a first-year to do "real" work, that's a deep discount over current billable rates. I think it makes for a more stable business model, anyways. It's expensive to hire loads of lawyers when business is good and boot them when it's bad. I also think there is some sort of unquantifiable (at least to me because I'm terrible at this type of thing) in doing that. At some point, wouldn't lawyers seek firms that have a more stable employment history?

Let me know what ya'll think -- this is something I think about a lot.

ToTransferOrNot
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Re: List of Salary-Cut Firms

Postby ToTransferOrNot » Wed Oct 21, 2009 6:24 pm

Ah, but the thing is PK--do you know whether you could get one of those gigs, at this point? I'm absolutely not questioning your skillset, but those gigs (especially PI) are overflowing with applicants, experienced out-of-work attorneys, deferred attorneys and such right now, and probably will be for the forseeable future. Would you have the connections in markets you haven't previously worked to be able to convince employers that you weren't just taking refuge until the NY market improved?

Everything else you said, I agree with completely. One of the things that pissed me off so much about teaching was the lockstep compensation model. It encourages waste and incompetance. Incompetant people get axed much more quickly in the private sector, but still, with a lockstep model, there isn't as much incentive to really excel.

I also agree that the first (and second, and third) year work paradigm needs to change. One of the reasons I feel 1st, 2nd, 3rd year associates are (generally) overpaid is that the work given to those folks just isn't worth what it's currently billed at. I'm amazed that clients didn't start demanding lower rates on things like due dilligence a long time ago.

06072010
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Re: List of Salary-Cut Firms

Postby 06072010 » Wed Oct 21, 2009 9:57 pm

I'm very lucky that I have a 2nd and 3rd option available if shit goes awry. I have never kept biglaw as my only option and have some connections that would pay me significantly less, but I'd still have a job. It's not shit law, but it's not biglaw either.

I'm not a biglaw or bust guy. I have an idea of how I'd like to make a practice and right now biglaw & my firm are compatable with my plans. I think it's healthy for both the firm and the associate to reevaluate every year to see if the relationship is beneficial -- if not, why bother sticking it out? Counting down the time until "up or out" is a good way to be caught with out a chair when the music stops.




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