Threat of banks sparks associate salary war
The loudest noise in the US legal market pre-Christmas was generated by associate bonus announcements. Bonuses largely stayed static on last year.
Base salaries, however, are a different story. Most US associates, particularly those in New York, received generous $20,000 (£10,160) raises in their base salaries only 11 months ago. But January brought another stampede to bump up pay in what is generally perceived as an attempt by firms to hang on to associates who might be tempted by even bigger bucks at investment banks and private equity houses. Simpson Thacher & Bartlett led the charge, raising base associate salaries from $145,000 (£73,650) to $160,000 (£81,270) at the most junior end, whereas at the top end the figure reached $290,000 (£147,300) for the most senior associates.
Within a week 25 firms had matched the generosity of the New York firms. Among them were: Akin Gump Strauss Hauer & Feld, Cadwalader Wickersham & Taft, Cleary Gottlieb Steen & Hamilton, Cravath Swaine & Moore, Dewey Ballantine, Fried Frank Harris Shriver & Jacobson, Milbank Tweed Hadley & McCloy, Paul Weiss Rifkind Wharton & Garrison, Shearman & Sterling, Skadden Arps Slate Meagher & Flom, Sullivan & Cromwell, Weil Gotshal & Manges, White & Case and Willkie Farr & Gallagher.
All matched the $160,000 (£81,270) for the ‘class of 2006’. But there was some movement at the top end, with Sullivan being the only firm to break the $300,000 (£152,400) barrier, compensating its most senior associates with $310,000 (£157,500).
The more cynical reader might deduce that Sullivan needs to do more than most to retain its associates. It is reportedly suffering an attrition rate of more than 30 per cent while also battling a sordid discrimination case brought by one of its associates.
Sullivan sparked 2006’s pay war and, although the firm could be forgiven for being preoccupied with other matters this year, some lawyers are pointing to the significance of Simpson Thacher’s emergence as pack leader. Just 10 years ago Manhattan stalwart Cravath was normally guaranteed to make the first move, but Simpson Thacher’s rising importance mirrors that of the private equity houses, the most elite of which Simpson Thacher can count as (very lucrative) clients.
Meanwhile, largesse was not limited just to the US firms. Clifford Chance and Allen & Overy announced that they would match their US rivals – but only in New York. That means that a newly qualified associate in Clifford Chance’s New York office is paid £81,000, more than £25,000 higher than in London.
London associates at US firms, meanwhile, should not crack open the champagne just yet. Shearman for one announced that it would not be reviewing London pay until at least May.
But Dewey was generous enough to offer the same salary increases across the board, meaning its best-paid City associates are now remunerated £187,000 once an $80,000 (£40,630) bonus is factored in. Cleary and Milbank are also spreading the wealth across the Atlantic.
Dewey exodus continues post failed merger
Dewey was, however, in the spotlight this month more for the fact that it walked away from the altar and a union with Orrick Herrington & Sutcliffe than for its associate salary hike.
Both firms cited ‘significant challenges’ as reasons for the split. These have since emerged to be Dewey’s £45m pensions black hole, the heavy losses Dewey was suffering from its partner ranks as a direct result of the merger and wranglings over management control of the combined firm.
Of course, with the larger-than-life Orrick chair Ralph Baxter pitched against the workaholic head of Dewey Mort Pierce, that could have been expected. But as first revealed by The Lawyer (15 January), Baxter was demanding a $25m (£12.7m) payout over five years had the proposed merger gone through.
Even with no merger, Dewey is still haemorrhaging senior partners a month down the line. London, which had remained unscathed, took a heavy hit from the loss of capital markets star Camille Abousleiman and partner Louise Roman Bernstein to LeBoeuf Lamb Greene & MacRae. In their first week at their new home the pair closed three Eurobond offerings, including an issue in Kazakhstan worth $1.1bn (£558.73m).
The departures did not stop there. As revealed on www.thelawyer.com (3 February), former management committee member and compensation and benefits partner Paul Wessel left Dewey’s New York headquarters for Milbank to “pursue leadership opportunities”.
China holds appeal as US firms head east
The first weeks of 2007 witnessed particular expansionism among US firms, with at least three looking eastwards.
Foley & Lardner opened in Shanghai with a raid on Weil for its China head of IP. McDermott Will & Emery also chose Shanghai for its first Asia office by entering into an alliance with a Chinese firm. McDermott China Law Offices is the first-ever Sino-US law combination.
Opening in Singapore in January was Philadelphia firm Duane Morris. It also confirmed that it would be opening in Vietnam (The Lawyer, 27 November 2006). In fact, it was not satisfied with just one Vietnamese office and felt it needed two. Mayer Brown Rowe & Maw (MBRM) increased its European clout by entering into a strategic alliance with Spanish firm Ramón & Cajal. That is not quite as committed a step as Latham & Watkins‘, though, which launched two new Spanish offices by taking on local Cuatrecasas rainmaker José Luis Blanco.
Chicago-headquartered Sonnenschein Nath & Rosenthal bucked the trend by going west, opening its third California office in Silicon Valley. It poached Weil’s patent litigation partner Yar Chaikovsky then wasted no time in hiring another lateral in the form of Judge Chip Terrill, believed to be the only International Trade Commission judge currently in private practice.
Sonnenschein’s expansion plans do not stop at California. The firm is as interested in China as its peers, but London is also on a list of priorities for its young new chairman Elliot Portnoy.
In an exclusive interview with The Lawyer (8 January), Portnoy said the firm was sounding out a plan for a London relaunch as part of his plan to grow the firm’s revenue by 60 per cent to £370m.
US firms on staffing merry-go-round
The revolving doors at US firms have been in full swing this month, and not just at Dewey Ballantine. Skadden Arps Slate Meagher & Flom has snared Cadwalader Wickersham & Taft’s head of antitrust Steve Sunshine plus two of his partners. A stream of associates is also expected to follow.
Latham & Watkins pulled in two lateral partners in January, one of whom was the second former Enron prosecutor to join the firm. Kathryn Ruemmler worked under Sean Berkowitz, now at Latham’s Chicago office, in the Department of Justice’s taskforce on Enron.
Morrison & Foerster has been particularly active in the recruitment market. Not only did it raid US rivals Cleary Gottlieb Steen & Hamilton and Paul Weiss Rifkind Wharton & Garrison for two partners for its Hong Kong office, it also boosted London by taking on a partner from Ashurst and two partners from Freshfields Bruckhaus Deringer.