Cravath SHATTERS THE MARKET! Forum

[ToTransferOrNot]

All of this rabblerabblerabble is just that. Cravath lawyers (and biglaw lawyers in general) are sophisticated folks. If they think they're being undercompensated, they should go elsewhere. If they can't go elsewhere and get better compensation (including starting their own firm), guess what: they're not being undercompensated. If they aren't willing to take on a lot of risk for the possibility of a higher payday: they're still not being undercompensated (lack of risk is an aspect of compensation).

I don't understand why biglaw firms continue to pay even the base salaries they do, aside from the nagging fear that the market won't follow a drop in salary (see: Howrey, lol). To be sure, higher pay attracts the "top of the top" (see Wachtel, Bartlit, Susman, etc.) (or at least the real stars that are interested in certain practice areas - most of the above-market firms are lit boutiques, Wachtel is the only corporate one I'm aware of), but biglaw in general could drop to 120k/year with no bonus tomorrow and still get extremely qualified people.

no way. even if you are right about bonuses you are wrong about dropping base compensation. nobody can pay off their loans at 120k. does cravath want its associates slangin' on the side to make that 2500/month loan payment?

"No one" can pay off their loans at 120k? And by "no one", I assume you mean the overwhelming majority of law grads who would sell a kidney for a shot at a $120k job, right? Why would Cravath give a darn about how quickly its associates can pay off their loans? Obviously there is a level of pay where you start losing people to lower-paying options with lower hours, but I'm not sure that $120k is that level. You can start getting into morale arguments, but morale isn't terribly good at any biglaw firm, and bad morale only matters if people have another option and so the morale leads to issues with work.

[Anonymous User]

I'm not saying that these numbers are OK. I have no opinion. But the notion that the market will exceed Cravath is silly, at least for fall bonuses. Heck, I know plenty of V100s that didn't pay spring bonuses.

Firm I'm going to didn't pay Spring bonuses, but apparently, they said they'd make it up with fall bonuses. Now with Cravath low-balling it will be interesting to see what happens since they're usually go lockstep/hours-based (however, I only had one offer, so it's not like I had a choice ). After this BS, I kind of wouldn't mind if they just switch over to "merit", which was a rumor a while back (even if it really means "black box of suck", I'm starting to come around to that being better than "Cravath-scale of suck").

Also, it will be interesting to see what Cahill does. They paid above Cravath-level both last fall and gave spring bonuses, so it will be interesting to see if they keep up paying above-market bonuses or go back to the Cravath scale. I know they've slowed down since the early summer (since Capital Markets is mostly dead right now), but their PPP is still pretty astronomical considering they weren't even a V50 until this year.

[Old Gregg]

but their PPP is still pretty astronomical considering they weren't even a V50 until this year.

Just like their bonuses, Cahill's PPP was an anomaly.

[ToTransferOrNot]

^ +1 to this (and to Anonymous above it). Firms will pay Cravath's scale this year (or less), it will not result in a biglaw exodus, and we'll all get to have this conversation again next year.

From a descriptive standpoint, I agree. The more interesting questions, to me at least, are (1) whether there will be a repeat of the spring bonus phenomenon, perhaps along the "check raise" lines suggested by Elie, and (2) how much of an impact the decreasing bonus (as a % of PPP) trend has on NYC biglaw vs. other major markets. On (2), large bonuses are the primary justification for the longer hours and higher COL faced by NYC associates. But if bonuses remain stagnant and (relatively) small, the smart money will continue to lie elsewhere, for instance in markets like Atlanta and Houston.

Well, the base scale is higher in the primary markets than most secondary markets already. As far as NYC vs other primary markets are concerned - that's been a prestige/exit options (supposedly anyway - I'm not confident that Cravath has better options than Kirkland, but eh)/it's where the jobs are/"I<3NYC" thing already. Bonuses would have to be astronomically higher in NYC to account for the actual economics (we're talking $25,000+, probably more, and a boatload more when you start talking about Texas). I'm not sure stagnant bonuses will do much more to drive people from NYC to the other primary or secondary markets than the other overwhelming negative economics of NYC already do.

[Renzo]

^ +1 to this (and to Anonymous above it). Firms will pay Cravath's scale this year (or less), it will not result in a biglaw exodus, and we'll all get to have this conversation again next year.

From a descriptive standpoint, I agree. The more interesting questions, to me at least, are (1) whether there will be a repeat of the spring bonus phenomenon, perhaps along the "check raise" lines suggested by Elie, and (2) how much of an impact the decreasing bonus (as a % of PPP) trend has on NYC biglaw vs. other major markets. On (2), large bonuses are the primary justification for the longer hours and higher COL faced by NYC associates. But if bonuses remain stagnant and (relatively) small, the smart money will continue to lie elsewhere, for instance in markets like Atlanta and Houston.

I think the bolded is key. If this is the new normal, good luck getting people to kill themselves to make their hours when most of them only plan on being at the firm for a few years in any case. You'll still get a few partnership strivers who will try, but honestly, why kill yourself for an extra 4% of your base salary (and it's going to be taxed to hell)?

[c3pO4]

All of this rabblerabblerabble is just that. Cravath lawyers (and biglaw lawyers in general) are sophisticated folks. If they think they're being undercompensated, they should go elsewhere. If they can't go elsewhere and get better compensation (including starting their own firm), guess what: they're not being undercompensated. If they aren't willing to take on a lot of risk for the possibility of a higher payday: they're still not being undercompensated (lack of risk is an aspect of compensation).

I don't understand why biglaw firms continue to pay even the base salaries they do, aside from the nagging fear that the market won't follow a drop in salary (see: Howrey, lol). To be sure, higher pay attracts the "top of the top" (see Wachtel, Bartlit, Susman, etc.) (or at least the real stars that are interested in certain practice areas - most of the above-market firms are lit boutiques, Wachtel is the only corporate one I'm aware of), but biglaw in general could drop to 120k/year with no bonus tomorrow and still get extremely qualified people.

no way. even if you are right about bonuses you are wrong about dropping base compensation. nobody can pay off their loans at 120k. does cravath want its associates slangin' on the side to make that 2500/month loan payment?

"No one" can pay off their loans at 120k? And by "no one", I assume you mean the overwhelming majority of law grads who would sell a kidney for a shot at a $120k job, right? Why would Cravath give a darn about how quickly its associates can pay off their loans? Obviously there is a level of pay where you start losing people to lower-paying options with lower hours, but I'm not sure that $120k is that level. You can start getting into morale arguments, but morale isn't terribly good at any biglaw firm, and bad morale only matters if people have another option and so the morale leads to issues with work.

Oh look, somebody else wants to compare lawyers who work at the top biglaw firms to the rest of the struggling JD's to analyze compensation.

As explained already, compensation at these firms is a function of value added to the firm and supply of associates. Cravath's profits went up, their associates worked more hours, and the top 10-15% of T14 grads has not increased in size, so maintaining last year's low bonuses is low.

These types of comments are coming from law students who know nothing of business. Although now that I think about it, if this is the economic reasoning representative of lawyers, it's no wonder Partners eagerly lowball their associates.

[ToTransferOrNot]

Yes, I am totally a clueless law student

You made a generic comment about "ability to pay loans" on $120k - that isn't something unique to Cravath or biglaw-caliber people, and your statement was ludicrous.

I already addressed the argument you're bringing up: If they think they're being undercompensated, they should go elsewhere. If they can't go elsewhere, they aren't being undercompensated and should STFU; if they can, they should do it and STFU.

And saying that maintaining last year's bonuses is "low" - a fairness argument - is just lulzy. It's a business. Business owners look to maximize their wallets. If they get too greedy compared to what the labor market will bear, they lose good employees and don't make as much money in the future. Get over it.

[Old Gregg]

These types of comments are coming from law students who know nothing of business.

LOL you're one of them, son.

[c3pO4]

These types of comments are coming from law students who know nothing of business.

LOL you're one of them, son.

Yea, but I understand business. And I'm not wrong. This might be a surprise to you, but some law students have probably accomplished more in business than even biglaw associates such as yourself. I'm not your son. In fact, prior to law school, I might have hired your firm or the like to represent my business. You seriously love thinking your superior to the students on this forum, and just come in to trash talk, even if you don't actually disagree with what's being said?

[Anonymous User]

All of this rabblerabblerabble is just that. Cravath lawyers (and biglaw lawyers in general) are sophisticated folks. If they think they're being undercompensated, they should go elsewhere. If they can't go elsewhere and get better compensation (including starting their own firm), guess what: they're not being undercompensated. If they aren't willing to take on a lot of risk for the possibility of a higher payday: they're still not being undercompensated (lack of risk is an aspect of compensation).

I don't understand why biglaw firms continue to pay even the base salaries they do, aside from the nagging fear that the market won't follow a drop in salary (see: Howrey, lol). To be sure, higher pay attracts the "top of the top" (see Wachtel, Bartlit, Susman, etc.) (or at least the real stars that are interested in certain practice areas - most of the above-market firms are lit boutiques, Wachtel is the only corporate one I'm aware of), but biglaw in general could drop to 120k/year with no bonus tomorrow and still get extremely qualified people.

no way. even if you are right about bonuses you are wrong about dropping base compensation. nobody can pay off their loans at 120k. does cravath want its associates slangin' on the side to make that 2500/month loan payment?

"No one" can pay off their loans at 120k? And by "no one", I assume you mean the overwhelming majority of law grads who would sell a kidney for a shot at a $120k job, right? Why would Cravath give a darn about how quickly its associates can pay off their loans? Obviously there is a level of pay where you start losing people to lower-paying options with lower hours, but I'm not sure that $120k is that level. You can start getting into morale arguments, but morale isn't terribly good at any biglaw firm, and bad morale only matters if people have another option and so the morale leads to issues with work.

cr. If a V100 firm decided to lower entry-level salaries to 120K, they could easily fill their class with T14 students. That's how many "surplus" students there are relative to entry-level jobs. They may not get top of the class anymore, but I doubt they would get the bottom (plenty of middle of the class people at CCN still looking). They could then keep midlevel and senior salaries where they are now so people won't jump ship when they get a little experience.

[c3pO4]

Yes, I am totally a clueless law student

You made a generic comment about "ability to pay loans" on $120k - that isn't something unique to Cravath or biglaw-caliber people, and your statement was ludicrous.

I already addressed the argument you're bringing up: If they think they're being undercompensated, they should go elsewhere. If they can't go elsewhere, they aren't being undercompensated and should STFU; if they can, they should do it and STFU.

Are you a Cravath partner? If not, then why the vitriol? Do you have any reasoning other than, if they don't like it they should leave?

[ToTransferOrNot]

All of this rabblerabblerabble is just that. Cravath lawyers (and biglaw lawyers in general) are sophisticated folks. If they think they're being undercompensated, they should go elsewhere. If they can't go elsewhere and get better compensation (including starting their own firm), guess what: they're not being undercompensated. If they aren't willing to take on a lot of risk for the possibility of a higher payday: they're still not being undercompensated (lack of risk is an aspect of compensation).

I don't understand why biglaw firms continue to pay even the base salaries they do, aside from the nagging fear that the market won't follow a drop in salary (see: Howrey, lol). To be sure, higher pay attracts the "top of the top" (see Wachtel, Bartlit, Susman, etc.) (or at least the real stars that are interested in certain practice areas - most of the above-market firms are lit boutiques, Wachtel is the only corporate one I'm aware of), but biglaw in general could drop to 120k/year with no bonus tomorrow and still get extremely qualified people.

no way. even if you are right about bonuses you are wrong about dropping base compensation. nobody can pay off their loans at 120k. does cravath want its associates slangin' on the side to make that 2500/month loan payment?

"No one" can pay off their loans at 120k? And by "no one", I assume you mean the overwhelming majority of law grads who would sell a kidney for a shot at a $120k job, right? Why would Cravath give a darn about how quickly its associates can pay off their loans? Obviously there is a level of pay where you start losing people to lower-paying options with lower hours, but I'm not sure that $120k is that level. You can start getting into morale arguments, but morale isn't terribly good at any biglaw firm, and bad morale only matters if people have another option and so the morale leads to issues with work.

cr. If a V100 firm decided to lower entry-level salaries to 120K, they could easily fill their class with T14 students. That's how many "surplus" students there are relative to entry-level jobs. They may not get top of the class anymore, but I doubt they would get the bottom (plenty of middle of the class people at CCN still looking). They could then keep midlevel and senior salaries where they are now so people won't jump ship when they get a little experience.

btw, just to clarify, I was talking about the biglaw market as a whole, not just single firms. While a single firm certainly could drop to $120k, there's no question that firm would get lower-quality applicants. If all of biglaw wasw able to drop their pay to $120k without getting into antitrust issues, though, biglaw would still get basically the same quality applicant pool - meaning that the biglaw market in general is overpaying people.

[Renzo]

cr. If a V100 firm decided to lower entry-level salaries to 120K, they could easily fill their class with T14 students. That's how many "surplus" students there are relative to entry-level jobs. They may not get top of the class anymore, but I doubt they would get the bottom (plenty of middle of the class people at CCN still looking). They could then keep midlevel and senior salaries where they are now so people won't jump ship when they get a little experience.

You must be anonymous because you are a former Howrey partner, and you don't want anyone to point out how poorly this worked out when you tried it.

[c3pO4]

btw, just to clarify, I was talking about the biglaw market as a whole, not just single firms. While a single firm certainly could drop to $120k, there's no question that firm would get lower-quality applicants. If all of biglaw wasw able to drop their pay to $120k without getting into antitrust issues, though, biglaw would still get basically the same quality applicant pool - meaning that the biglaw market in general is overpaying people.

OK. I'll give you that. But this would never happen, because enough firms would buck the trend to poach top talent. It's not like they have to reduce salaries, given soaring profits and the relatively low ratio of associate pay to profits.

[ToTransferOrNot]

btw, just to clarify, I was talking about the biglaw market as a whole, not just single firms. While a single firm certainly could drop to $120k, there's no question that firm would get lower-quality applicants. If all of biglaw wasw able to drop their pay to $120k without getting into antitrust issues, though, biglaw would still get basically the same quality applicant pool - meaning that the biglaw market in general is overpaying people.

OK. I'll give you that. But this would never happen, because enough firms would buck the trend to poach top talent. It's not like they have to reduce salaries, given soaring profits and the relatively low ratio of associate pay to profits.

Not true though, because firms can already do this (and some do). If firms truly are seeing skyrocketing profits as you say, and wanted to poach talent, they could do that right this minute by paying more.

[Old Gregg]

These types of comments are coming from law students who know nothing of business.

LOL you're one of them, son.

Yea, but I understand business. And I'm not wrong. This might be a surprise to you, but some law students have probably accomplished more in business than even biglaw associates such as yourself. I'm not your son. In fact, prior to law school, I might have hired your firm or the like to represent my business. You seriously love thinking your superior to the students on this forum, and just come in to trash talk, even if you don't actually disagree with what's being said?

--ImageRemoved--

[Veyron]

btw, just to clarify, I was talking about the biglaw market as a whole, not just single firms. While a single firm certainly could drop to $120k, there's no question that firm would get lower-quality applicants. If all of biglaw wasw able to drop their pay to $120k without getting into antitrust issues, though, biglaw would still get basically the same quality applicant pool - meaning that the biglaw market in general is overpaying people.

OK. I'll give you that. But this would never happen, because enough firms would buck the trend to poach top talent. It's not like they have to reduce salaries, given soaring profits and the relatively low ratio of associate pay to profits.

Not true though, because firms can already do this (and some do). If firms truly are seeing skyrocketing profits as you say, and wanted to poach talent, they could do that right this minute by paying more.

Wachtell, Susman, Duval and Stachenfeld, etc ....

[c3pO4]

btw, just to clarify, I was talking about the biglaw market as a whole, not just single firms. While a single firm certainly could drop to $120k, there's no question that firm would get lower-quality applicants. If all of biglaw wasw able to drop their pay to $120k without getting into antitrust issues, though, biglaw would still get basically the same quality applicant pool - meaning that the biglaw market in general is overpaying people.

OK. I'll give you that. But this would never happen, because enough firms would buck the trend to poach top talent. It's not like they have to reduce salaries, given soaring profits and the relatively low ratio of associate pay to profits.

Not true though, because firms can already do this (and some do). If firms truly are seeing skyrocketing profits as you say, and wanted to poach talent, they could do that right this minute by paying more.

Wachtell, Susman, Duval and Stachenfeld, etc ....

Kirkland, Boies. Firms do this now. If you are looking to maximize your cash and you are a top law student, you'd pick these firms over Cravath.

[xcountryjunkie]

Duval doesn't count for paying more. Sure, a few associates start at $175K, but they also have plenty of associates starting at half that.

I'd add Boies to the list of firms that pay more because they can.

[ToTransferOrNot]

Wachtell, Susman, Duval and Stachenfeld, etc ....

Kirkland, Boies. Firms do this now. If you are looking to maximize your cash and you are a top law student, you'd pick these firms over Cravath.

They absolutely do. Which proves my point.

[Anonymous User]

cr. If a V100 firm decided to lower entry-level salaries to 120K, they could easily fill their class with T14 students. That's how many "surplus" students there are relative to entry-level jobs. They may not get top of the class anymore, but I doubt they would get the bottom (plenty of middle of the class people at CCN still looking). They could then keep midlevel and senior salaries where they are now so people won't jump ship when they get a little experience.

You must be anonymous because you are a former Howrey partner, and you don't want anyone to point out how poorly this worked out when you tried it.

Whoops, didn't mean to post anon.

All the firms that have tried this cut salaries because they were in financial trouble. Howrey didn't fold because they lowered salaries and had to settle for the bottom 25% at T14s vs. the 50-75%- they folded because of partner mismanagement.

But if a firm was in good financial shape did this, I doubt it would hurt the firm's ability to attract people from top schools. They could still present clients with a roster of T14 graduates. And they could still leave midlevel salaries where they are. Obviously lowering entry-level salaries sends a bad signal to other firms, but maybe keeping midlevel salaries high will be enough to signal that a firm still retains talent.

[romothesavior]

Cp, you started out with such promise ITT. Don't go all herp derp on us now.

[NinerFan]

btw, just to clarify, I was talking about the biglaw market as a whole, not just single firms. While a single firm certainly could drop to $120k, there's no question that firm would get lower-quality applicants. If all of biglaw wasw able to drop their pay to $120k without getting into antitrust issues, though, biglaw would still get basically the same quality applicant pool - meaning that the biglaw market in general is overpaying people.

That's not true. If biglaw moved to 120, you'd see a lot of talented students from T14 schools move to other markets. Hell, the firm I SA'd at as a 1L is in a market that pays almost 100k starting off with a MUCH lower COL and QOL and lower billables.

There would have to be a shift downward not only from biglaw, but also midlaw and smaller non-shitlaw firms.

[timbs4339]

btw, just to clarify, I was talking about the biglaw market as a whole, not just single firms. While a single firm certainly could drop to $120k, there's no question that firm would get lower-quality applicants. If all of biglaw wasw able to drop their pay to $120k without getting into antitrust issues, though, biglaw would still get basically the same quality applicant pool - meaning that the biglaw market in general is overpaying people.

The question is: how much lower quality- and does the drop off in quality really matter that much? For example, I have no doubt a firm could fill at 40 or 60 person class with T14 grads ITE, even paying 120K to start. Whether there is a huge difference between the work product of a T14 student at median and a student at the 25th percentile, or the class would be so bad as to make it impossible find good midlevels within the group, is another question.

[Veyron]

Duval doesn't count for paying more. Sure, a few associates start at $175K, but they also have plenty of associates starting at half that.

I'd add Boies to the list of firms that pay more because they can.

Right, but the ones that they get at the 175 tier (i.e. all summer associates) are the ones that would have gone to the V20s. I'm not talking about the ones that "audition" for the job.