Breaking: NY To $180K!!! Cravath Raises Associate Base Salaries!!!
Happy happy, joy joy! What does the new Cravath pay scale look like?
Of course we’re breaking out the Drudge siren for this!
This afternoon we are pleased to report that Cravath, Swaine & Moore — the venerable New York law firm, arguably the biggest and best name in Biglaw — has raised base salaries for its associates. The new CSM salary scale is as follows, with the increase over the current Simpson Thacher scale noted parenthetically:
1st year (class of 2015) – $180,000 ($160,000 + $20,000)
2nd year (class of 2014) – $190,000 ($170,000 + $20,000)
3rd year (class of 2013) – $210,000 ($185,000 +$25,000)
4th year (class of 2012) – $235,000 ($210,000 +$25,000)
5th year (class of 2011) – $260,000 ($230,000 + $30,000)
6th year (class of 2010) – $280,000 ($250,000 + $30,000)
7th year (class of 2009) – $300,000 ($265,000 + $35,000)
8th year (class of 2008) – $315,000 ($280,000 + $35,000)
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The scene outside Worldwide Plaza today?
According to the memorandum, which we received from multiple Cravath sources, “The increase is effective July 1, 2016, and will be reflected in paychecks commencing on July 8, 2016.” The memo is posted in full on the next page. You saw the news and memo here first, folks; PLEASE CREDIT ABOVE THE LAW. Thank you.
The news of a Biglaw pay raise comes as a pleasant surprise to many. Two weeks ago, in a reader poll asking you to predict when the next pay raise would happen, the most popular response was “later than the second quarter of 2017” (36 percent), and the second-place response was “never” (24 percent). The correct response, “very soon — before the end of the second quarter of 2016,” received a measly six percent of the vote. Biglaw associates, aren’t you happy to be wrong? (Last week, I suggested that readers were being overly pessimistic and that the pay hike could come sooner than the first quarter of 2017 — which is why we’ve had a draft version of this post in our system for a while now, just in case.)
The fact that Cravath is leading the charge is less of a surprise. As I recently wrote, “Personally I’d bet on Cravath. It is still, in the minds of many, the quintessential Biglaw firm, synonymous with profit, power, and prestige.” And in a reader poll in that same story, asking readers who would lead the next round of Biglaw base salary increases, Cravath got 31 percent of the vote, more than any other named firm. (In a subsequent story that tossed Quinn Emanuel into the mix, QE got more votes than Cravath, but Cravath still came in second.)
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The scale is very logical. It’s not the “NY to 190” scale from the old ATL comments meme, but in some ways it makes more sense. It reflects two aspects of what we discussed last week (and what readers voted on as likely features of the new pay scale): a $180,000 starting salary, and pay raises that get larger with seniority (as opposed to a uniform raise across the board), to reward and retain midlevel and senior associates.
One thing to note about the Cravath scale: it ends with eighth-year associates, reflecting Cravath’s commendably short partnership track. It will be interesting to see if other Biglaw firms, especially those with decade-long tracks, do anything differently on base comp for their very senior associates and counsel.
Now let’s tackle some questions that this news raises:
How did this event come to pass? (Besides, of course, Above the Law’s launching its “NY to 190” series of articles on May 5 — Biglaw associates, you’re welcome.)
Credit goes to both Cravath associates and Cravath partners. Word on the street is that in recent town hall meetings with presiding partner Allen Parker, CSM associates had the guts to raise the issue of base salaries (which can be awkward to mention to the partners you work for; this is why many associates convey comp concerns through Above the Law).
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Associates provided Parker with arguments and information in support of an adjustment to the base salary scale. They noted that the last pay raise took place in January 2007, almost a decade ago, and the cost of living in New York City, where Cravath has almost all of its lawyers (aside from a small London office), has increased dramatically since January 2007. During this period, the cost of health insurance to associates has grown (at pretty much every firm), and law school tuition and debt burdens have risen as well. At the junior levels, some associates were having a hard time making ends meet.
Presumably Allen Parker shared these concerns to the Cravath partnership and the partners decided it was the right thing to do, an investment in the firm’s famously talented and hardworking associates. Based on the timing of the memo, we’re guessing the partnership approved the move at its lunch meeting today. (As we’ve mentioned before in the context of bonus timing, the Cravath partnership still has a weekly partnership lunch meeting — a nice tradition, and one that CSM can still maintain because it has fewer than 100 partners, almost all of them in New York.)
Will other firms match the new Cravath scale? Of course! As we know from bonus season, Biglaw dances to Cravath’s tune. CSM’s peer firms, including all the other members of the “Fab Five” (Davis Polk, Simpson Thacher, Skadden Arps, and Sullivan & Cromwell), will all match in short order. But it will be interesting to see which Am Law 100 firms cry “uncle” at this point and don’t adopt the Cravath scale all the way up the ranks or in all offices. Expect some firms to adopt that $180,000 starting salary, so they can give the impression of keeping up with the Cravathians, but then pull the trick of salary compression (i.e., tiny pay increases for more-senior associates).
How fast will the matching happen? Pretty fast, I’m guessing; I expect at least a half-dozen firms to match before this week is over. Whether the pay raises will spread fast enough to trickle down to 2016 summer associates, who are traditionally paid at the prevailing rate for first-year associates, is an interesting question. The pay raise doesn’t go into effect for full-time associates until July and the memo says nothing about summers, so my guess would be no (and summers already have pretty sweet gigs — even at Cravath, where they work hard compared to summers at other firms).
Will any other firm beat the new Cravath scale? I doubt it. The CSM scale is both generous and sensible, so many firms will just be happy to match. And some firms won’t be all that happy; firms that aren’t doing as well as Cravath will match slowly or grudgingly. (In recent town halls at a fellow Fab Five member, management brushed aside associate inquiries about comp and expressed contentment–on the partners’ part–with current base salary levels. Expect this firm to match but not top Cravath.)
What does this mean for bonuses? The memo says nothing about bonuses. We’re guessing that Cravath will at least keep bonuses the same as last year. In 2007, the last time CSM raised base salaries, it paid great bonuses. But that will depend on what kind of 2017 the firm has. So far Cravath has been having an excellent year, but things could change between now and November or December.
We will, of course, track each and every Cravath match — with your help, of course. When your firm matches, please text us (646-820-8477) or email us (subject line: “[Firm Name] Matches Cravath”). Please include the memo if available. You can take a photo of the memo and send it via text or email if you don’t want to forward the original PDF or Word file.
Kudos and congrats — to Cravath associates on their raises, and to Cravath partners for doing right by their hardworking junior colleagues.
What do you think of this major news? Feel free to email us (subject line: “NY to 180”) — we will update this story with reactions below — and vote in our reader poll.
Will any other Biglaw firm beat the new Cravath pay scale?
Loading ...UPDATE (3:22 p.m.): Cravath is a classy place, but one of our elated sources couldn’t resist dropping the f-bomb: “F**king thrilled that we’re exhibiting leadership in compensation!”
UPDATE (3:29 p.m.): We have reached out to Cravath for comment and will update this post if and when we hear from the firm, of course.
UPDATE (4:10 p.m.): Here’s a question from the reader mailbag:
If firms’ New York offices match Cravath, and the non-NY offices have a policy of matching NYC, do you think those offices would match too? Is there any info about how non-NY offices of NY firms have responded as such in past salary hikes?
Hard to say. After Simpson announced its new pay scale back in January 2007, it took a while for non-NYC offices to adopt the full STB scale. But the current trend, as we’ve seen in so-called “unified bonus scales,” is to place less of a priority on geography when it comes to compensation — which makes sense, given that work can be done anywhere in the digital age.
On the other hand, if the Cravath scale is too rich for some firms’ blood, they can easily invoke the “New York is special” excuse. Geography is not an issue for Cravath, which has almost all of its lawyers in the Big Apple, but it is an issue for many other firms.
UPDATE (4:54 p.m.): Here’s additional coverage from the ABA Journal (and thanks to them for crediting and linking to us).
UPDATE (6:15 p.m.): And here’s the take of Big Law Business (quoting yours truly, among others). Casey Sullivan reached out to various law firm leaders, including John Quinn of Quinn Emanuel, who wrote in an email, “The increases happen periodically.” An uncharacteristically understated response; does Quinn have something up his sleeve?
UPDATE (8:34 p.m.): The dominoes have already started to fall — the first firm has announced that it’s matching Cravath’s new salary scale.
UPDATE (6/7/2016, 11:45 p.m.): The pay raise is spreading like wildfire; here’s our collected coverage of the 2016 salary increase. You can also sign up for the Above the Law compensation newsletter, which will give you real-time notification of pay raises and, later in the year, bonus announcements.
(Flip to the next page to read the complete Cravath memo about new base salaries.)
David Lat is the founder and managing editor of Above the Law and the author of Supreme Ambitions: A Novel. You can connect with David on Twitter (@DavidLat), LinkedIn, and Facebook, and you can reach him by email at dlat@abovethelaw.com.
