It’s bonus season in America, and at the nation’s biggest and most prestigious law firms, associates—attorneys who do not hold equity in the firms they work for—will be receiving yearend checks greater than the full salaries of many of their contemporaries. Cravath, Swaine & Moore, which sets the market for many top New York firms, announced in late November that its bonuses will range from $10,000 for the most junior associates to $60,000 for those closest to the partner level.
That’s still a far cry from the levels before the financial meltdown: In 2007, senior associates got $110,000 on top of their annual salaries. But no one’s making as much as they used to, and the bonuses are way up from 2011, when the top payout was $37,000. So this lucky group should be out celebrating at some stodgy lawyer bar. Right?
Not quite. In a twist that will probably delight the 99 percent, these associates, who are in the top 2 percent of wage earners in the country, are getting economically squeezed by other, more important lawyers who are in the top 1 percent. That’s because the partners who own these law firms—most of whom have seen their profits rebound to pre-recession heights—are hoarding a bigger share of the pie than ever before. Yep, the older lawyers who helped structure the instruments that wrecked the economy in the first place and who constantly give sound bites about how worried they are about business prospects are sitting like dragons atop piles of cash. American Lawyer reported that the average profit for a Cravath partner in 2007 was $3.3 million. In 2011 it was back up to $3.1 million.
I know, I know, #TwoPercentProblems. Crocodile tears flow for a fifth-year associate making $230,000 in base salary and a $34,000 Christmas bonus. But it’s worth keeping in mind that in 2007 the bonus to the same fifth-year associate—for the same work—was $95,000. In New York City, the difference between a $95,000 bonus and a $34,000 bonus is the difference between saying “rent is high in this city, but I can afford it” and “I’m living paycheck to paycheck in my crappy one bedroom.” After Simpson Thacher & Bartlett, another top New York firm, announced they’d be matching Cravath’s bonuses, one associate complained that his measly $10,000 check was an insult, given his $220,000 law school debt.
And let’s not forget that these partners are paying out these reduced bonuses to a much smaller group of people than in the boom times. In the summer of 2008, right before Lehman Brothers collapsed, Cravath brought in 161 summer associates. “Summers,” as they’re referred to, are the main way top firms hire fresh talent; most summer jobs translate into entry-level attorney positions. In 2011 the firm brought in only 53 summers according to the Association for Legal Career Professionals. In 2010 the firm had a mere 22. That represents far fewer mouths to feed—there would be less profit-sharing even if firms were paying out the same generous 2007 bonuses.
In fairness, Cravath’s partner pool has also shrunk. In 2007, 90 equity partners raked in that $3.3 million-per-partner haul. In 2011 the firm split the profits among 80. Essentially, that just means lawyers, both partners and associates, are doing more with less. Cravath’s gross revenue in 2011 was $568 million. Even in 2009, in the teeth of the recession, its gross revenue was $569 million. While 2012 numbers aren’t available yet, the firm figures to again post over half a billion dollars in gross revenue. The pie is still being made—it’s just that associates are getting a smaller slice. Sounds like a good lawyer joke if I’ve ever heard one.