Lawyers' bonuses fall with billings

$25,000 kind of small if you got $50,000 for 2001

January 02, 2003|By BLOOMBERG NEWS

Cravath Swaine & Moore cut bonuses in half for top salaried lawyers as business slowed in 2002, setting the trend for a second straight year for the biggest U.S. law firms.

New York-based Cravath, which has 500 lawyers, paid $25,000 in bonuses to senior lawyers, half its 2001 level. Shearman & Sterling, with 1,000 lawyers, and several other firms matched Cravath with payouts amounting to about a month's salary.

The lower year-end compensation shows how large firms have retreated from the heated competition for law school graduates in the 1990s, when a boom in mergers, initial public offerings and the computer and telecommunications industries caused the amount of legal work to soar, recruiters said.

"The choice that law firms had to make was whether to roll back salaries or back away from bonuses," said Ward Bauer, a principal at Newtown, Pa.-based Altman Weil, a legal consulting firm.

Of 25 large U.S. law firms surveyed by Bloomberg, most said they were following Cravath with $25,000 in year-end payments to top salaried lawyers. Morrison & Foerster, a large San Francisco firm, offered $12,000 this year.

Some firms didn't cut as much as Cravath. Weil, Gotshal & Manges, with 1,000 lawyers, said bonuses for senior lawyers would be as high as $40,000, still well below last year's $60,000.

Weil Gotshal bucked the revenue trend with work advising WorldCom Inc. and Enron Corp., the largest and second-largest bankruptcies in U.S. history. The New York firm's revenue was $581 million in 2001, according to American Lawyer magazine.

This year, Weil Gotshal earned $23.3 million in fees in four months' work on Enron, according to bankruptcy records. It billed WorldCom $4 million for three months and charged Global Crossing Ltd., the sixth-largest bankruptcy, $10.4 million.

Cadwalader, Wickersham & Taft, a New York firm, also will pay bonuses of $40,000. Cadwalader advised Pfizer Inc. on the largest merger in 2002, the drug company's $64 billion purchase of Pharmacia Corp., expected to be completed early this year.

In cutting bonuses, big firms are trying to return to the levels that prevailed before they were distorted by the boom in work that law firms enjoyed the past few years, Bauer said.

In 2000, for instance, Cravath's payouts ranged from $40,000 for first-year lawyers to $100,000 for senior salaried attorneys. In 2001, as Internet and IPO business fell, Cravath paid bonuses of $20,000 to $50,000, and many big firms followed suit.

Law firms also are reducing payouts to avoid possible job cuts this year.

"A cut in the bonuses will make sure the coffers are full enough so that everyone they did hire can get a bonus next year," said Lynn Mestel, a law firm consultant.

Bonuses for salaried lawyers, known as "associates," are smaller than those given by the investment banks and financial companies, which many big law firms represent. Salaries for recent graduates are smaller, too. First-year lawyers at the largest firms make about $125,000 a year, and a $15,000 bonus amounts to about six weeks' pay. Senior salaried lawyers make about $225,000.

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