On June 6, the law firm of Cravath, Swaine & Moore, the crème de la crème of Wall Street law firms, announced that it was increasing the salary for new attorneys just out of law school to $180,000 and for eighth-year associate attorneys to $315,000. (At the end of the eighth year an associate attorney is either chosen to be a partner or asked to leave the firm.) Such employees also may obtain annual bonuses. The average compensation for the firm’s partners, on the other hand, was $3.56 million.
Cravath, according to a profile from Chambers & Partners, has offices in New York City and London with a total of 90 partners and 426 associate attorneys. The firm’s website says it hires “only the top students from the nation’s finest law schools, we train our associates through a rigorous rotation of practices, we elevate partners exclusively from within and we compensate partners in a lockstep system throughout their careers.”
I react to this news from at least three perspectives.
First, as I explained in an earlier post, immediately after law school graduation in 1966 I joined Cravath as an associate attorney with an annual salary of $9,000 ($66,941 in 2016 Dollars). In 1968 the firm jumped the starting salary to $15,000 ($104,657 in 2016 Dollars) with similar boosts to the salaries of more senior associates. I left Cravath and New York City in 1970 even though being a Wall Street lawyer was challenging and exciting as was living in the city with a wife and two young sons. I value those years, but did not want to remain another four years to compete for a chance to become a Cravath partner with all the sacrifices of time, energy and stress that would require and with all the income and prestige that it would entail. Instead I chose to move to Minneapolis to practice law with Faegre & Benson (n/k/a Faegre Baker Daniels), about which I also have written.
Second, the Cravath move to a starting salary of $180,000 is clearly an outlier in the overall U.S. legal job market. While observers speculate that other prominent Wall Street law firms probably will match this increase, law firms in other U.S. cities and business corporations, in my opinion, will not do so, and clearly governments and nonprofit organizations with lawyers will not be able to do so.
Third, this increase in compensation comes after widespread weaknesses in the demand for lawyers in the U.S. Indeed, in recent years the openings for new attorneys have shriveled. Many recent law school graduates, often with large student-debt loads, have been unable to find law-related jobs. Some recent law graduates have sued their law schools with claims they had been scammed. Law school enrollments have been declining. I hope the Cravath increase is a sign that there may be increasing opportunities for new lawyers, but I am not holding my breath.
 Olson, Law Firm Salaries Jump for the First Time in Nearly a Decade, N.Y. Times (June 6, 2016); Randazzo, Law Firm Cravath Raising Starting Salaries to $180,000, W.S.J. (June 6, 2016); Lat, Breaking: NY To $180K!!! Cravath Raises Associate Base Salaries!!!, Above the Law (June 6, 2016).
8 thoughts on “Wall Street Law Firm Increases Attorneys’ Compensation”
Comment: Corporate Clients Resist Higher Legal Fees Associated with Increases in Attorneys’ Compensation
The jump in starting salaries for new attorneys to $180,000 by a Wall Street law firm, Cravath, Swaine & Moore, already has been matched (as of June 15th) by over 50 major law firms in New York City and across the U.S. with two going even higher ($200,000 by Desmarais in New York City and $190,000 by Susman Godfrey in Houston). 
Some corporate clients of these and other major law firms, however, are resisting higher legal fees often associated with higher compensation of their attorneys. Bank of America, for example, in an email to a group of law firms said Bank of said their increases in associate lawyer pay were unjustified and that the bank did “not expect to bear the costs of the firms’ decisions.” 
 Randazzo, Milbank, Paul Weiss Quickly Match Cravath’s Associate Raises. W.S.J. (June 7, 2016), http://blogs.wsj.com/law/2016/06/07/milbank-paul-weiss-quickly-match-cravaths-associates-raises/; Zaretsky, The Essential Salary Chart: Which Firms Have Annnounced Raises?, Above the Law (June 13, 2106), http://abovethelaw.com/2016/06/salary-wars-scorecard-which-firms-have-announced-raises/?rf=1.
 Randazzo, Corporate Clients Push Back After Law Firms Hike Starting Salaries, W.S.J. (June 15, 2016), http://www.wsj.com/articles/companies-push-back-at-law-firms-starting-salary-hikes-1466029554.
Comment: Continued Bad News for Many New Lawyers
While some new lawyers will earn increased, large compensation at major law firms in the U.S., many others struggle to find law jobs at decent salaries and pay off large amounts of student debt. Many law schools are also facing hard times with some shrinking, closing or threatening to close.
Scheiber, An Expensive Law Degree, and No Place to Use It, N.Y. Times (June 17, 2016) http://www.nytimes.com/2016/06/19/business/dealbook/an-expensive-law-degree-and-no-place-to-use-it.html
Comment: Another Analysis of Market for Law Graduates
According to a New York Times article, “let’s just accept that this is a world of haves and have-nots. Top law graduates are doing better than ever, while other law students have a steeper path to climb to earn that type of money.”
As expected, “big law firms are like lemmings. The top 50 or so all quickly moved to match Cravath,” which recently jumped its starting salary to $180,000. “For the lucky few who get jobs at these big firms, law school is a good investment. These young lawyers can earn more than $40,000 in one summer while they are still in law school and pay back their loans quickly. Many find that there are private firms willing to refinance their loans at rock-bottom interest rates.” However, “only the lucky 17 percent of graduates earn salaries this high. To be in this group, you needed to go to a top 10 school or graduate in the higher ranks of the top quartile of law schools.”
“Things are harder for every other law graduate. Law firm starting salaries are bimodal — meaning that while 17 percent of graduates earned a median salary of $160,000 in 2014, about half had a median starting salary of $40,000 to $65,000.”
Yet, Solomon also asserts, “most law graduates do secure employment that pay them more than they would have otherwise earned [if they had not gone to law school].”
Solomon, Law School a Solid Investment, Despite Pay Discrepancies, N.Y. Times (June 21, 2016), http://www.nytimes.com/2016/06/22/business/dealbook/law-school-a-solid-investment-despite-pay-discrepancies.html?ref=business
New Law Graduates Get Fewer Law Firm Jobs # 848D—8/18/16
“Last year’s law school graduates landed fewer jobs in private practice than any class in the last two decades, according to the National Association for Law Placement, which tracks developments in the legal profession.”
“The number of such jobs for newly credentialed lawyers probably shrank, [the Association] said, because graduates are competing ‘with other junior lawyers for most jobs other than entry-level associate positions at large law firms, some judicial clerkships and some government honors programs.’”
“And there is little change in sight because law firms of every size will face a smaller head count ‘in the coming years and even decades’ as law firms incorporate ‘growing efficiencies created by technology and business systems and increased competition from nontraditional legal services providers.’”
“The median law firm starting salary for . . . [new law graduates] grew last year to $100,000, up about 5 percent over the previous year. That was measured in advance of this summer’s round of salary increases at major law firms, but still lower than the median 2009 starting salary of $130,000 – the highest salary figure ever recorded.”
Olson, 2015 Law School Graduates Got Fewer Jobs in Private Practice, N.Y. Times (Aug. 17, 2016), http://www.nytimes.com/2016/08/18/business/dealbook/2015-law-school-graduates-got-fewer-jobs-in-private-practice.html?ref=business
Wall Street Law Firms Promise No Increase in Bonuses for 2016
Several Wall Street law firms have announced that they will retain the same range of bonuses for their associate attorneys for 2016 that were used last year: $15,000 to $100,000. The firms are Cravath, Swaine & Moore; Milbank Tweed Hadley & McCloy; and Paul, Weiss, Rifkind, Wharton & Garrison. This is after the firms last June had jumped their starting salaries for such attorneys to $180,000.
Olson, Cravath Bonuses for Law Firm Associates Remain Unchanged, N.Y. Times (Nov. 28, 2016), http://www.nytimes.com/2016/11/28/business/dealbook/cravath-bonuses-for-law-firm-associates-remain-unchanged.html?ref=business
Women Lawyers’ Difficulties in Getting Good Jobs
“[F]emale law graduates [do not] land legal jobs that pay higher wages and afford long-term job security and professional advancement.” This is so even though women now constitute nearly one half of total law school enrollments. The reason? They “are clustered in lower-ranked schools, and fewer women are enrolled in the country’s most prestigious institutions.”
Olson, More Law Degrees for Women, but Fewer Good Jobs, N.Y. Times (Nov. 30, 2016), http://www.nytimes.com/2016/11/30/business/dealbook/more-law-degrees-for-women-but-fewer-good-jobs.html?ref=business
Women Law Students Now Majority
For the first time ever in the U.S. there are more women law students than men, 55,766 to 55,059. The total law school enrollment is flat, stabilizing after dropping almost 30 % since 2010.
However, many of these women are in lower-ranked schools, which may limit their ability to secure full-time, long-term jobs as lawyers.
Olson, Women Make Up Majority of U.S. Law Students for First Time, N.Y. times (Dec. 16, 2016), http://www.nytimes.com/2016/12/16/business/dealbook/women-majority-of-us-law-students-first-time.html?rref=collection%2Fsectioncollection%2Fus&action=click&contentCollection=us®ion=stream&module=stream_unit&version=latest&contentPlacement=2&pgtype=sectionfront.
Increased Competition Among Top-Tier Law Firms
“America’s law firms, even the most prominent, are mired in an era of noticeably modest growth and volatility in the industry, and 2017 promises to be no better.”
Evidence of the overall modest growth can be seen in elite firms “hiring groups of lawyers to expand specific practice areas, changing pay practices, jettisoning or demoting some partners and staff members and seeking ways to distinguish their brands to set them apart from competitors.” There also is more competition among such firms to acquire lucrative legal work from businesses.
Olson, With Competition Fierce, Even Elite Law Firms Resort to the Unusual, N.Y. Times (Jan. 9, 2017), http://www.nytimes.com/2017/01/09/business/dealbook/with-competition-fierce-even-elite-law-firms-resort-to-the-unusual.html?ref=business