Law Firms Raising Associates' Pay to Discourage Defections to Dot- Coms

By David Leonhardt N. Y. Times News Service | THE JOURNAL RECORD, February 3, 2000 | Go to article overview

Law Firms Raising Associates' Pay to Discourage Defections to Dot- Coms


David Leonhardt N. Y. Times News Service, THE JOURNAL RECORD


In a stark demonstration of the lure and the power of the Internet, some of the nation's top law firms have raised pay for associates by as much as 50 percent in the last two weeks.

The move is the most recent part of a chain reaction that began just before New Year's Day in Silicon Valley, where firms have lost dozens of lawyers to dot-com start-ups, and is now spreading to the white-shoe firms of New York. At least one top New York law firm has matched the California raises, and partners at other firms around the country have held impromptu meetings to discuss salaries. Many are expected to offer big raises in the coming weeks.

The pay increases will allow first-year associates to earn as much as $160,000 a year, depending on their year-end bonus. As firms simultaneously adjust the salaries of all other associates, the payroll at a single firm could grow by tens of millions of dollars.

Across the country, more than a thousand lawyers will receive the raises, and that number will multiply if more firms follow suit.

News of the pay increases has ricocheted around law offices thanks to Internet chat boards, like Yahoo's "Greedy Associates," where lawyers have been posting messages about developments at their firms. The online discussions have, in turn, raised the pressure on firms that have not yet offered pay increases, partners said.

Lawyers are now waiting to see whether other New York firms follow the lead of Davis Polk & Wardwell, which told its associates in the last week that it would essentially match the new Silicon Valley salaries, according to lawyers at other firms and a copy of an internal memo posted on the Web. Davis Polk employees did not return phone calls.

Typically, the handful of the most prestigious New York firms match each other's raises.

Under the new structure, first-year lawyers will make a base salary of $125,000, and with bonuses, often for working long hours, they can earn more than $150,000. Last year, beginning lawyers in the Bay Area earned about $95,000 in base salary, plus bonuses of around $5,000.

At top New York firms during the 1990s, starting base salaries rose from about $80,000 to about $105,000, where they stood until this week. Many lawyers also received bonuses of about $10,000 last year.

With the latest raises, fourth-year associates at many firms will be able to make more than $200,000, up from less than $150,000 last year. The steep cost of the raises have the potential to cut partners' takes by as much as one-fifth. It will also very likely force increases in the firms' fees, which already start at about $200 an hour. Partners said, however, that they had little choice but to try and stem the Internet brain drain and to keep rivals' firms from gaining a recruiting edge.

"We want to make it harder for people to leave us for clients," said Tower C. Snow Jr., the chairman of Brobeck, Phleger & Harrison, a San Francisco-based firm that saw turnover among associates rise to 25 percent last year, from 12 percent in 1998, as lawyers jumped ship for both legal and executive jobs at Ebay, Etrade and an array of Web start-ups. Brobeck was among the firms raising its salary structure recently.

The approach, associates say, has its appeal, in large part because much of the pay at Internet companies comes from stock options that may be worthless. "That much guaranteed salary is going to make people think pretty hard" about leaving, said Howard Holderness, a seventh-year associate at Brobeck. …

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