What is it our parents always told us? If your friend jumped off a bridge, does that mean you should do the same? In this case, it is more like “Match Game 2012” than it is about “follow the leader.” So the question becomes, how necessary is it for a law firm to match another’s year-end bonus? And in my business, what are the marketing implications for a law firm that does or does not choose to follow suit?
As reported by Peter Lattman in The New York Times this week, “Cravath sets the tone for law firm bonuses.” Law firms don’t have NFL salary caps or MLB luxury taxes to help keep things competitive. In many ways, Cravath is like the New York Yankees of law firms–old, venerable and wealthy. They generate a lot of revenue that others can’t, and can spend accordingly. But most other teams simply don’t generate the same revenue and can’t pay out the same amounts. Spending more does not mean you always win, but you are usually in the game.
If the process holds true that Cravath sets the scale, then you could argue they could do it to squeeze others as much as it might be to reward the associates that spend the year billing the night away. If you think about it, if they force less profitable firms to profit less, are they not creating an even stronger market advantage for themselves?