December 1, 2008 12:01 PM
Following Pack, Davis Polk to Halve Bonuses
Posted by Julie Triedman
The firm says 2008 bonuses will range from a prorated $17,500 for first year associates to $32,500 for eighth and ninth years. Those amounts match the reduced rates announced November 24 by Simpson Thacher & Bartlett. Last year, bonuses began at $35,000 and topped out at $65,000. In a memo released to firm lawyers today at noon, the management committee thanked associates, and noted that the year posed a "challenging economic environment."
"We've always believed that bonuses should reflect general economic conditions, including the environment that our clients are experiencing," John Ettinger, the firm's managing partner, tells The Am Law Daily. "As is obvious, the economy faces a recession, liquidity crisis, and massive financial deleveraging."
By our calculations, the reduction should save the firm roughly $12 million--or about a 3 percent cost savings--based on last year's Am Law 100 reporting of revenue and expenses.
Viewed year to year, the reduction is much larger. In addition to regular year-end bonuses last year, special bonuses added an additional $10,000 to $50,000 to the sum, depending on an associate's year. Those will not be given to the firm's 570 associates this year. The special bonus "was in recognition of 2007 being a boom year," Ettinger says. Skadden, Arps, Slate, Meagher & Flom and Cravath, Swaine & Moore also have dropped the special bonus.
New York firms are feeling a financial squeeze more than non-New York firms on average, according to a report by Citi Private Bank published earlier this month that tracked firm financial performance over the first three quarters of 2008. But those same firms also experienced greater profit surges on average than the firms outside New York in 2007. During that boom year, Davis Polk's revenues surged 21 percent to $789 million, according to this year's Am Law 100 ranking, and its 159 equity partners averaged $2.3 million in compensation, the 13th highest profits per partner nationally.Make a comment