Wall Street Law Firm Increases Attorneys’ Compensation

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.[1]

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.

============================================

[1] 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).