Matching 2012 Stipends, Cravath Kicks Off Bonus Season
Cravath, Swaine & Moore kicked off associate bonus season Monday, announcing extra payments ranging from $10,000 to $60,000 that are identical to the stipends the firm awarded in 2012, according to an internal firm memo obtained by The Am Law Daily.
If history is any guide, the next few weeks will bring a flurry of copycat announcements from other Am Law 100 firms, which typically wait to award their bonuses until Cravath has set the standard. Cravath associates learned about their bonuses in a late-afternoon email, which came a week later than last year's Nov. 26 memo.
That this year's associate bonuses would mirror last year's makes sense given that law firms have been treading water financially in 2013, according to the most recent industry surveys released by Wells Fargo and Citibank. Both banks report that firms are on track to achieve revenue and profit growth in the low single digits in 2013, while seeing their expenses rise at nearly the same rate.
Even so, associates have been productive enough this year for firms to consider keeping bonus rates steady. Indeed, according to the latest Wells Fargo report, associates as a group have logged more hours on average this year than partners.
At the same time, Cravath—which had average profits per equity partner of $3.4 million last year—and its peers have fared better financially this year than some other large firms. Wells' data shows that firms with average profits per partner of at least $2 million saw their gross revenue rise 5 percent in the first nine months of the year compared to the same period in 2012—nearly double the revenue growth acheived by the broader Am Law 100.
The identical bonuses came as no surprise to one industry observer. "I didn't expect there to be any vast changes between 2012 and 2013 in the bonus structure," says Sheri Michaels, a legal recruiter at Major, Lindsey & Africa. "The law firm economics did not support that."
The Cravath memo, signed by presiding partner C. Allen Parker and managing partners Robert Baron and William Fogg, notes that the firm does not apply any billable hour requirements when determining eligibility for the bonuses and that "virtually all associates" will receive the full amount. The memo also says that bonuses for senior attorneys, specialist attorneys, discovery specialist attorneys and foreign associate attorneys will be determined on an individual basis and that the payouts will be made on Friday, Dec. 20.
While substantially higher than those awarded in 2011 and 2010, the extra payments pale in comparison with what Cravath associates received prior to the recession. In those flush times, the firm's bonuses ranged from $35,000 to $110,000.
While not mentioned in the memo, Cravath's lawyers have had a busy year. Major M&A deals handled by the firm include advising home builder Toll Brothers Inc. in its $1.6 billion acquisition of Shapell Industries' home building business; representing Crown Castle in connection with its $4.85 billion purchase of nearly 10,000 AT&T towers; acting as outside counsel to ATK in its $985 million acquisition of Bushnell Group Holdings; and advising Weyerhauser in its $2.65 billion purchase of Longview Timber.
Cravath also advised The Washington Post Company on the historic sale of its newspaper publishing business to Amazon CEO Jeff Bezos for $250 million and is representing Time Warner Inc. in the ongoing spin-off of its Time Inc. publishing business, whose magazine portfolio includes TIME, Entertainment Weekly, Sports Illustrated and Fortune.
On the litigation front, Cravath continues to serve as national coordinating counsel to Credit Suisse in residential mortgage–backed securities matters and also represents JPMorgan Chase in RMBS litigation. In February the firm won the dismissal of a securities fraud action brought by GAMCO Investors against its client Vivendi.
Here is the full Cravath bonus scale:
Class of 2013 — $10,000 (prorated)
Class of 2012 — $10,000
Class of 2011 — $14,000
Class of 2010 — $20,000
Class of 2009 — $27,000
Class of 2008 — $34,000
Class of 2007 — $40,000
Class of 2006 — $50,000
Class of 2005 — $60,000