Money and Meaning

Volume 7 • Issue 5 • July/August 2021
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Upping the Ante (Again)

Highlighting key stories about the profession you may have missed

On June 10, Milbank raised its first-year associate salaries to $200,000, a $10,000 annual raise that set off a compensation race between New York’s elite law firms. Davis Polk & Wardwell quickly followed suit—setting a high bar at $205,000 as a starting salary—and, for the last month, New York law firms have tried to outdo each other, with the fervor spilling over into other cities as well as international and smaller markets. Over the last unprecedented year, law firm compensation has been a hot topic. In September 2020, Cooley set off a similar competition when it distributed surprise bonuses across its associate pool, and others, like Reed Smith, have removed regional pay differences across the United States for their associates.

In an interview with The American Lawyer, Milbank firm chair Scott Edelman credited the decision to raise salaries to the associates’ high quality of work and productivity during such a challenging year. “It’s a modest raise, and we thought it would be nice to have Milbank’s associates feel like they were on the front edge,” he told the publication.

Many young attorneys are reevaluating how work fits into their personal lives as we approach a post-pandemic world.

In 2020, many firms had prepared for a year of quarantine and economic restrictions by instituting a series of austerity measures, including layoffs, furloughs, and cuts to general compensation. But instead of experiencing expected shortfalls, BigLaw had an exceedingly good year, thanks in part to an uptick in transactional corporate work and litigation as well as a decrease in travel and office upkeep.

A variety of additional factors may also be driving the salary hikes. Some regard the higher paychecks as a reward for large billables in a difficult year during which the line between work and life was further blurred. Others have noted that the unexpectedly intense pace of the corporate financial sphere in the last year, especially a heightened interest in SPACs, has resulted in a competition for top talent.

Meanwhile, according to Reuters, associate turnover at New York’s top law firms is steeply rising. In the last year, Milbank, for instance, has structured bonuses as two-part installments in an effort to reward and retain top associates. Many young attorneys are reevaluating how work fits into their personal lives as we approach a post-pandemic world, moving to firms with better work-life balance, relocating closer to family, or opting for Silicon Valley and the tech world. Outside the legal market, workers across the country are quitting in droves, which economists say largely reflects employees’ positive feelings about their future economic prospects.

It should be noted that, in addition to offering pay increases, firms are attempting to address associate mental health during the pandemic recovery period by reiterating flexible or hybrid work arrangements or awarding young associates with extra vacation time. (For more on post-pandemic work, see “Working out the Meaning of Work.”)

Clients, for their part, have signaled ambivalence over these measures, exemplified by the memo from Morgan Stanley Chief Legal Officer Eric Grossman demanding that lawyers at the financial giant return to the office or risk degrading office culture and the quality of their work product. While some call such raises after a year of hardship “tone-deaf,” law firms continue to have public salary competitions without seeing consistent client pushback. (Clients may refuse to pay, keep a close eye on their downstream billing effects, or just write off first-year and junior associate time altogether).

It remains to be seen how associates will respond going forward as the BigLaw compensation competition rages on. Moreover, newer measures to introduce flexible work arrangements and to internalize and codify positive changes to firm culture developed through the course of the pandemic, add new wrinkles to law firms’ efforts to attract and retain younger talent. This June, Laura Leopard, founder of legal intelligence firm Leopard Solutions, was quoted in the Wall Street Journal as saying: “Money alone may not sway many in this market … Work-from-home flexibility and other perks will be needed to win in this atmosphere.”

Money and Meaning Volume 7 • Issue 5 • July/August 2021

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