Where do I email the memo?

Nevermined...here you go.

http://www.legalfriction.com/?q=node/148

V&E and Fulbright essentially have the same system.

CONFIRMED!!!!!!!!!!!

I have the memo and have sent it to Lat.

Okay, whoa. The link referred to a $65,000 bonus. But what's up with "deferred compensation?" Basically, they say you make $160,000, but you don't see it unless you work 2,000 hours. Pretty sneaky.

A 3rd year who bills 1975 will make the same amount as a 2nd year who bills 1600. Way to think it through, guys.

strange compression in years 7 and 8 in TX. What's up with that?

Wow. They adopted the old Steptoe model that went down in flames.

And a 6th year billing 1975 makes the same as a 3rd year billing 2000

If they are offering you a large chunk of $ at 2000, and you bill only 1975, you're pretty stupid. The marginal cost of not billing those extra 25 hours is so high you'd be economically irrational not to do it.

Systems like this result in two clusters of associates: those billing 2000 hours and no more, and those who completely slack off and skate in at 1600.

They really haven't given the folks in DC a raise at all. Now they have to bill 2000 hrs just to get paid market salary in DC. And if they don't bill 2000 hrs then they are below market.

The Texas folks have gotten a legitimate raise when it wasn't needed. They should have just paid DC rates in DC.

More breaking news . . .

K&S continues to do absolutely nothing in Atlanta. We are now officially the worst paid Am Law 40 associates in the country.

What if you just don't have the work? Seems to provide a strong incentive (esp. in years where $65k is being held back) to potentially fabricate hours. Bad system, if you ask me. Lockstep if you hit your hours from the year before seems better. And still provides the same checks. Anyone disagree?!?

Ok, fine. Substitute 1900 for 1975. A hardworking associate could have a slow year and end up with 1900 (and not really have a chance to push it over the line in December). The point is that this is a poor way to institute "merit-based" pay. That said, if I'm an associate at V&E Houston, I'm dancing in the streets right now. This is a ton of money down there.

The incentive to fabricate hours is ever-present in any firm that has a significant bonus tied to hours. So V&E is no different than a lot of other firms.

I think it's a bad system from V&E's point of view. If you start off the year slowly, you will mail it in the rest of the year if getting back to a 2000 hour pace is too difficult. And the cash they pay at 2000 is so significant that there's no reason to bill more than that.

Have Alston & Bird or Sutherland Asbill raised in DC?

Atlanta? Atlanta?

Anyone? Anyone? Anyone?

(a la Buller)

Whatever happened to this guy?

Inaugural Texas List of Shame

Akin Gump
Andrews Kurth
Baker Botts
Bracewell Giuliani
Carrington Coleman
Fulbright
Gardere
Haynes and Boone
Hughes & Luce
Hunton & Williams
Jackson Walker
Jones Day
Locke Liddell
Munsch Hardt
Thompson Knight
Winstead

It's not even a "bonus tied to hours."

There is no bonus. Anyone at a NY or decent Cali firm in DC will make the full V&E pay for showing up, and then a $30k bonus for hitting 2000 hours. I have no idea why V&E would brag about this.

And setting up the table so that it looks like the left-hand column is base and the right is bonus when really the left is base PLUS bonus and the right is irrelevant is very misleading.

Read the memo- bonuses unchanged. So bonuses are still low, but they are there.

Atlanta to $35k!

11:44, there are still bonuses at 1950, 2150 and 2300 hours. Did you read the memo?

Atlanta to $35k!

The bonuses are still in place for the 2007 year but the memo suggests that those will go away in 2008.

Wow. This gives Howrey a run for its money as the dumbest idea for pay. Why in the world would I want to work at a firm where I could lose money that my friends are getting whether they make hours or not?

Real TX salary scale

Yr - Base - Bonus@2000 hrs
1 - 160 - 0
2 - 170 - 0
3 - 170 - 15
4 - 175 - 35
5 - 180 - 50
6 - 185 - 65
7 - 190 - 65
8 - 195 - 65

"Why in the world would I want to work at a firm where I could lose money that my friends are getting whether they make hours or not?"

When you want to work in TX and they're the only firm to step up and do something. Guarantee the other TX firms will follow suit, but certainly not do anything more than what V&E has done.

I think this is a prettty well thought-out and fair compensation system. And, FYI, I'm a V&E associate.

this is tricky indeed. a step up from what V&E had before, but tricky nonetheless.

The attorneys in Houston are getting a wonderful raise whether they make their hours or not. A first year in Houston is making more than a 6th year made in 2003. It is enough to buy the fabulous townhome and an M3. There are no state income taxes. It is amazing.

There is really no reason to work at VE. Most of the assoicates there were already Vault 20 rejects. So, they will certainly not improve their standing with
any law students.

The question is why did VE even raise in Houston?

The bigger question when will NYC raise and how high.

A national pay scale doesn't make sense to me. I think firms need to stop trying to equalize pay.

For Texas associates, this is an incredibly generous compensation system, but a very poorly designed system.

For DC associates, it's f'ing cheap and poorly designed.

I'm a V&E associate and I think its horsesh*t. Deferred compensation for hitting an hours target already has a name: "bonus." This is expecially true considering V&E's bonus structure is completely non-discretionary and hours-based already. Unless you are a first or second-year, nothing has changed in DC. Screw the mid-levels, as long as recruiting doesn't suffer.

Youngstown, Ohio to $25K!!

I would like to thank the V&E partners for giving me an extra 25k for the 2000+ hours I was going to bill anyway.

So which Texas firms won't be able to follow suit?

any indication from other bigtex firms?

It doesn't make any sense to raise compensation in Texas. The NYC firms with Texas offices pay NYC rates, but they are very small with few associates in Texas. Because there's little flight risk of associates leaving Texas firms for NYC firms, why try to compete? And certainly V&E and Texas firms in general don't have the problem of corporate associates leaving for investment banks, which is what has been driving up NYC pay of late.

Anon at 12:35, shut it! We need more cash down here. lol I agree it is somewhat irrational and most predicted it wouldn't happen, but I couldn't be happier. The summer associates will put pressure on all firms here to raise so I should get good news soon.

Amen 12:39. Come on summers...put the pressure on F&J!!

12:30

I expect F&J and BB will have to follow suit. I think AK will probably use this to try and establish it is playing in the big leagues, and Akin will follow along as well. It would seem Locke Liddell will want to follow along as well given its recent merger. Hunton and Jones which were half assing it will seem to need to finally finish the job, though Hunton is maybe more questionable.

After that, it gets interesting, and I think you may really see some "official" stratification between levels of firms.

here's my prediction for future order of raises: BB, AG, F&J. I'm not sure if any other TX firms will raise. the real question is will they keep that deferred compensation aspect of the scheme.

King & Spalding will have to match in Houston. And when they do, if they don't do something in Atlanta quickly, it's going to be really, really (did I say really?) f-ugly.

what happens is you are in tax/ERISA or some other low bill dep't?

The notable part is the "firm credit" hours...those 2,000 aren't all necessarily billable hours, correct? Pro bono, maybe recruiting and whatnot? This is huge in Dallas and Houston...

Texas to $190!

This really is a bad deal for the D.C. associates. Think about the marginal incentive. Assume that the base pay scale is for 1800 hours. A fourth year in Texas makes $35,000 for working 200 more hours---$175/billable hour. A fourth year in DC makes only $20,000 for working 200 more hours---$100/billable hour. Of course, the D.C. fourth year is getting paid $15,000 more for the first 1800 hours, but not much more---something like $8/billable hour more. This system gives huge rewards for mid-levels in Texas to work more hours and only modest rewards to D.C. mid-levels to work more hours. The end result, oddly enough, is probably that more Texas associates will shoot for the 2000 hour level than DC associates, and Texas associates will, on average, get paid more.

Did you read the memo? The memo explains what firm credit hours are management approved billables. Those means work for the firm not recuriting and rarely committee work. This usually means if you are an ERISA atty and the firm benefits dept has an issue and you work on it then this is considered a management approved billable. The other thing is when you work on case law update for all clients. This is generally regarded as management approved billable hours.

I believe NYC will go to 190k in the fall and the question is how does O'Melveney and other Cali firms respond. What about Wilmer Hale?

I don't think that any firm outside of NYC will match NYC rates in areas outside of NYC.

I love how quickly a "Confidential" memo got distributed to a law blog!

Damn! And I thought my bosses in Memphis pulled some dirty shit!

12:46 is right about K&S having to move in Houston and then in ATL. But ATL is going to wait for the summers to leave and mabes until after OCI starts to see what sort of reception they are getting.

But what about the Riyadh office? How is the cost of living there v. Dubai? And more importantly, do they get free Coke?

Thanks V&E someone in Tex had to finally step up.

1:36

If K&S wants to test the waters OCI-ing at Ivy League schools (or even any school that could place in Charlotte or Texas) offering 130 and ridiculous compression, that would be, uh, how shall I put this....an interesting business decision by the partnership.

Why would anyone even drop to interview for a spot in Altanta anymore?

1:45,

It's embarrassing it took this long, especially with summer associates in town. Do the Texas firms think the summers didn't realize what was happening? This ain't Houston. If I was a summer who split and liked both firms equally, I would definitely choose the one that demonstrated its commitment to paying the market rate. Not the one that lived in denial for 6 weeks.

You guys need to shut the hell up. A firm living in "denial". A firm that is committed to paying the market rate? I don't think a firm necessarily feels that way. They care about 1) making money; 2) making their rich clients happy; and 3) making (partners) the money.

The sense of entitlement that an associate making 6 figures is absolutely mindboggling. SHUT UP ALREADY YOU UNAPPRECIATIVE HICKS!!!

I am a V&E associate and I think that the raise was perfectly fair (for the Texas offices anyway, I would probably be miffed about the deferred comp piece if I were in DC). Yes, some practice groups tend not to bill as much, but all along the Texas associates have been arguing that cost of living is irrelevant and what matters is that some of us bill the same hours as our DC and NY counterparts. This raise certainly rewards anyone in Texas who is working DC or NY hours. If you aren't you are still doing pretty well financially in Texas with the new base salary -- and you have a life.

As for the people who are upset that Texas associates got a raise in the first place, chill out. It will probably only push up comp in NY, DC, LA, etc., in the long run. And maybe provide some relief for the people in Atlanta so that you won't have to smack them down every day over their salary complaints.

2:23,

I don't see why living in D.C. makes me a hick, but whatever floats your boat.

And I think you misunderstand how the partners make money.

When a young associate leaves the firm, the partners make less money.

The firms that charge the most sell themselves as offering the best services money can buy. When you can't recruit decent associates, the work quality suffers, the clients become unhappy, and the partners make less money.

I don't see how the cost of living is irrelevant. If a TX and DC associate bill the same number of hours and make the same base salary, the TX associate is compensated significantly better when you consider that as a rule they spend much less on housing and don't have to pay state income tax. That's not to begrudge TX associates their raises, but the delay in giving out DC raises was due in large part by the need to decide what to do with the TX associates. Paying all the associates of Texas firms in D.C. 160k will probably cost less than one firm paying its Houston associates 160k.

To those bent out of shape about the low cost of living in TX- move to Texas, get to work, and enjoy the cost of living difference.

If your smart-elec reply to that statement is "why would I ever want to live in TX" --exactly! Now you understand the choice some associates make in order to receive the benefits of that lower cost of living so quit your whining.

How about folks getting bent out of shape because they live in Atlanta (which is more expensive than Houston or Dallas), make significantly less than Texas associates (now a whopping amount), bill more hours than most every firm in Texas (this debate over 2000 hours is funny to us), and have to pay a damn state income tax.

I'm at a loss.

Someone stated in nicely the other day: complaining that you should be paid more for living in a high COL city amounts to nothing more than saying "I spend more money than my Dallas (or pick your city) counterpart, so I should be paid more." It's your choice to live where COL is higher, and it's not the job of partners to pay you more to compensate you for your own personal spending choices.

If you are living in a city that requires you to work longer hours for what amounts to less pay in terms of purchasing power, then that is your own bad decision. I'd say that the associates making NY-level salary in cheaper markets are the smart ones.

3:09, same argument: then why don't you move to Texas?

I sure don't want to be the client with a matter being worked on in December by an associate who needs the hours to get over the line to the big bonus - padding galore!!

Patrick Ewing famously justified his high salary by saying "we spend a lot of money so we need to make a lot of money"

"Then why don't you move to Texas."

Thanks for agreeing with me, genius. The point of the post was that it doesn't make sense to come to Atlanta anymore and that the firms here are going to see some bleeding if they don;t do something fast. I don't want people to feel sorry for me. I want my firm to wake the f*&K up.

On behalf of BigTex associates everywhere: Thank you V&E. Thank you.

3:17, I'm guessing you don't follow law firm compensation very closely.

Under current comp scales, a first year at V&E Houston earns more than a fifth year at K&S Atlanta. Law students everywhere, take note, and drop your resumes accordingly.

You actually have to be a sixth year at K&S Atlanta to earn what a 1st year now earns at V&E Texas.

Wonder what the difference in the billing rate is? Wonder where all of that money is going? Beer to the first correct response.....

Come on 3:45. That money's going to the greedy Atlanta partners. Now give me a Lone Star!

I owe you one.

Riddle me this:
One reason I should not leave Atlanta behind.

(Better rap music isn't a winning answer.)

I'm sure if you left Atlanta you would miss the World of Coca-Cola, but in Texas we have Dr Pepper, which is clearly a superior beverage anyway! :-)

Seriously, high-five to V&E. Thanks for leading the way once again.

There is compression down the road, but Texas now has to be the best deal for 1st to 3rd year Big Law associates.

Good work, Low cost of living, No state income tax, relatively humane hours, AND NOW.....Tier 1 compensation.

"Riddle me this:
One reason I should not leave Atlanta behind."

-best looking women? or a great consumer culture?

No, even the bling and the bit&*es aren't enought to cover $500k over 7 years.

3:51, your wrong.... SPRITE SPRITE SPRITE!!!

3:11,

No it's not the partners' job to compensate me for my own personal spending choices. It's the partners' job to not screw up the firm by paying Texas associates 160k when there is no logical reason to do so.

Atlanta firms have apparently already caught on, so why is the uptake so slow in Texas?

Who cares about soda. Atlanta has better beer. Shiner Bock = overrated crap. Sweetwater = good stuff.

F the partners, let's squeeze every damn penny we can out of them... and if by some miracle we become partners, then F the associates and let's squeeze every damn penny we can out of them

4:04: point taken, but with my Houston salary and COL I can import all the Sweetwater beer I want!

NYC to 190. NOW.

Unconfirmed report that Locke Liddell has already matched? Can anyone confirm?

Of course, it's now inevitable that BB and FJ will have to match as well. It will be very telling to see how national firms with texas offices respond, especially Jones Day. If BB and FJ match the 160, that'll leave Jones Day at 150 all by itself. One would expect them to match, but they did nothing a few months ago when Gibson Dunn (their alleged peer?) went to 160 in Dallas.

Why does VE have an office in DC? To provide an enhanced service to national clients. Would the firm suffer if it only had offices in Texas? Yes.

My point is the firm is receiving a benefit from associates living is markets with higher costs of living and the firm should compensate them for that.

I don't see why that is unfair.

Anyone have the details on VE's "credit hours" system (other than what is provided in the memo)?

why shouldn't associates in houston make more. this is the headquarters for big oil, all of which are making record profits. in commercial litigation, associates here are charged with more responsibility than any of their coastal counterparts (outside of coastal boutiques). and it is a flat ass myth if you think that associates in new york work longer hours than houston associates at biglaw and bigtex (at least those that want to make partner). these raises should have occured when the the coasts started this game months ago and is long over due.

With Texas now catching up to DC and California, anyone working in BigLaw in NY who doesn't have family or other ties binding them to the tristate region and who frankly wants to be able to own a nice house, drive a nice car and have money left over for the niceties in life will leave for the above mentioned places. Sure you may work as many hours as in NY, but at least you make enough money (after tax and COL) to make it all seem worthwhile.

Andrews Kurth raised!

From: Jewell, Bob
Sent: Wednesday, July 18, 2007 5:06 PM
To: Associates - Austin; Associates - Dallas; Associates - DC; Associates - Houston; Associates - Woodlands
Cc: Hancock, Amy; Wade, Kendall; Policy Committee; Moore, Connie; Livesay, Bill
Subject: Associate Salaries
Importance: High

To Texas and Washington Associates:

As widely anticipated, associate salaries are increasing in the Texas market and also appear to have settled in Washington, D.C. Today, we can say that the Firm will increase associate salaries across the board in our Texas and Washington offices, effective August 1, 2007. Base salaries will be $160,000 for the class of 2006 and $170,000 for the class of 2005, and we will be competitive for all of our associate classes. We are still working on the details of the compensation structure for other associate classes. We expect those markets will settle quickly and allow us to finalize and announce more details. Before we do so, as we did in 2006, we are seeking input from our associates so that our compensation structure rewards our attorneys and preserves our culture.

Regards,
Bob

Treasury Circular 230 Disclosure - To comply with requirements imposed by the Internal Revenue Service, we inform you that any tax advice contained in this written communication (including any attachment) is not intended or written to be used, and cannot be used, by any person for the purpose of avoiding tax penalties that may be imposed on the person. If this written communication contains any tax advice that is used or referred to in connection with the promoting, marketing or recommending of any transaction(s) or matter(s), this written communication should be construed as written to support the promoting, marketing or recommending of the transaction(s) or matter(s) addressed by this written communication, and the taxpayer should seek advice based on the taxpayer's particular circumstances from an independent tax advisor. No limitation has been imposed by Andrews Kurth LLP on disclosure of the tax treatment or tax structure of the transaction(s) or matter(s).

WGWAG

For all you King & Spalding kids out there, Andrews Kurth had PPP of 730K last year. Which means their associates live in a cheaper city than you and work for partners who make barely half what yours do, yet their salaries are 30K more than yours. How does that make you feel?

7:51

How does it make me feel?

Like a punk ass bitch.

At this rate, the law school class of 2010 should come out making, oh, 200K....

I will LOVE it if K&S raises their Houston office and leaves Atlanta behind again.

And they pretty much have to in Houston because people will jet to AK, Bracewell, V&E etc.

My friends at K&S Houston are berated with calls directly from competing firms trying to get them to come across the street.

Updated Texas List of Shame (removing Andrews Kurth and adding King & Spalding)

Akin Gump
Baker Botts
Bracewell Giuliani
Carrington Coleman
Fulbright
Gardere
Haynes and Boone
Hughes & Luce
Hunton & Williams
Jackson Walker
Jones Day
King & Spalding
Locke Liddell
Munsch Hardt
Thompson Knight
Winstead

Anyone think these raises will hit TX only firms, like Munsch Hardt and Hughes & Luce?

Any BB or FJ associate willing/able to provide updates or internal reaction to AK and VE raises

The AK memo is rather ominous. Are they going to match the V&E plan for the post-second-years?

No updates yet. But the V&E news has sent a lot of associates into full-panic mode.

For those of you suggesting that this sucks for people in low-hour departments (tax and ERISA), those people actually go home, and the ones who don't are billing more than 2,000. I'd rather make $170k and work their hours than $185-200k to work mine (I'm in corporate).

I agree, some people on the edge will get screwed, but only if they don't make the effort. Just do what you should have been doing all along, track your hours and when July hits and you've only billed 900, think, "Crap! If I want my deferred compensation and 1950-hour bonus, I better get moving!" Like others have noted, in any department you will start to see those billing 1800 and those billing 2000 or 2150+. At least it will be easier to figure out who doesn't have a shot in hell at making partner.

P.S. I feel sorry for every single associate in DC. This is great for those of us in H'town, but you guys are getting royally screwed. If you want, you can stay one of the 8 bedrooms in the 6,000 sf home I'm going to start building with my new raise while you try to make some connections in the mothership and get a transfer.

Any FJ associate with any updates??? In 2006, they were a little late in making the match to VE; however, due to the timing of the current raise (near OCI), wouldnt it be prudent for them to match soon?

How bad are FJ and BB sharting their pants right now?

THANK YOU JOE DILG!!!!!!

BB couldn't care less. They're almost definitely coming out with their plan Monday (I hear the partners are meeting this weekend).

With F and J's partner profits last year though, they need to be a little worried. They're starting to noticeably lag behind the other two.

Honestly I didn't see AK being the first to follow. They might be overextending if they match all the way up, which could explain the silence on compensation after second year...

1:20. No real surprise that AK came out second. They've been the first to follow VE on every round of raises historically. Everyone here at AK expects the match to be the same up the ranks as well. Maybe some subtle differences, but I'd be surprised if AK goes with something completely different. As always, VE basically sets the market.

When AK has dragged their feet in the past in nailing down the details, they've made up for it by going retroactive to some date so the delay has never mattered.

Unless you are from here or your spouse is from here, there is no concieveable reason to come to Atlanta to practice law.

If you have the creds to land a job at K&S or A&B, there's a pretty good chance you can land a job at BIGTEX. Do yourself a favor, go work for BIGTEX. If 5-7 yrs. you'll thank me for it....

K&S Atlanta is truly getting it where the sun don't shine. What the......?

11:44:

"There is no bonus. "

Um, you make more than the standard salary if you meet a certain number of hours (a number above the average associate's billables). How is that not a bonus?

"Anyone at a NY or decent Cali firm in DC will make the full V&E pay for showing up, and then a $30k bonus for hitting 2000 hours. "

Gee, you know the difference between the markets - want a cookie? People moan if Texas makes as much as NY then laughs if Texas doesn't make as much as NY.

"I have no idea why V&E would brag about this. "

How are they bragging, by letting their associates know their own pay structure?

11:44:

"There is no bonus. "

Um, you make more than the standard salary if you meet a certain number of hours (a number above the average associate's billables). How is that not a bonus?

"Anyone at a NY or decent Cali firm in DC will make the full V&E pay for showing up, and then a $30k bonus for hitting 2000 hours. "

Gee, you know the difference between the markets - want a cookie? People moan if Texas makes as much as NY then laughs if Texas doesn't make as much as NY.

"I have no idea why V&E would brag about this. "

How are they bragging, by letting their associates know their own pay structure?

No way Jones Day goes to 165... probably just 160 with an automatic 5k bonus, like in the old days. They can't justify paying more to the Dallas kids base than their offices in NYC, CHI, DC, LA, etc.

Interesting question is whether they'll do it at all, and if so, can they do it in time for this round of hiring. I've heard the home office moves at about the same speed as Congress.

I clerked with V&E this summer and there had been rumors that they were going to do this, but were going to wait until August to do so that way they wouldn't have to pay the summer associates based on the new salary.

I for one am thrilled that I will be working at a firm that is dedicated to making their associates happy. Do we deserve the raise? Of course not, but we wouldn't be working at V&E if we hadn't earned it.

any news re: Fulbright??