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Does money still make the world go round in the legal community?
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Are Lawyers Still Motivated by Money?
The 2021 Raise Race began last week when Milbank announced on Thursday it is raising salaries for its associates globally, with first-years starting at $200,000 a year. Within hours, others, including McDermott Will & Emery, Cadwalader, Wickersham & Taft and Mintz, Levin, Cohn, Ferris, Glovsky and Popeo had jumped into the fray.
Not to be outdone, Davis Polk & Wardwell announced on Friday that it was not just matching Milbank’s pay scale but exceeding it. The firm’s first-year associates will start with an annual salary of $202,500 and $365,000 for senior associates and of counsel.
Before the day was done, Fenwick & West, Winston & Strawn and Baker McKenzie all announced they would match the Davis Polk scale, as did Dechert, Proskauer Rose, Lowenstein Sandler and Cleary Gottlieb Steen & Hamilton. And McDermott, Will & Emery, which had already announced it would match Milbank, said it would now match the Davis Polk scale.
There were variations in the scale, however—most notably, Davis Polk and Baker McKenzie said the change would apply only to U.S.-based associates. That is likely welcome news to global firms based outside the U.S., including the major firms in the U.K. where profit margins are lower, and in markets where U.S.-based law firms have been expanding and poaching talent from large domestic firms. The heated market for legal services—the result of private equity firms doing a huge number of deals all over the world—has made the competition for talent this year fiercer than ever, with firms even poaching associates so they can meet demand. And non-U.S. firms usually cannot compete on price.
But maybe they won’t have to. In some parts of the world, young lawyers aren’t as driven by the mighty dollar (or pound or euro) as in the States. And there are signs that even in the U.S., at least some top talent may value work-life balance or remote working at least as much as money. As Matthew Lepore, general counsel and chief compliance officer of the German chemicals giant BASF told Germany correspondent Eva von Schaper last week, young lawyers should try new things and take risks early in their careers. “Don’t follow the money,” he says.
David Lat, the well-known legal columnist who survived a near-death battle with COVID-19 last year, echoed that sentiment in a Law.com interview published last week. “Life is short,” he said. “Take chances.”
That's a tough sell for what is known to be a particularly risk-averse crowd.
In-house counsel are just as unhappy about the new pay increases as non-U.S. international law firms—an event that one GC called “tone-deaf.” Coming off the pandemic, many in-house legal departments, including those of Fortune 500 multinationals, are still under directives to curb outside legal costs and reduce their spend for outside counsel. The last thing they want is to foot the bill for increased salaries of young, relatively inexperienced lawyers.
But law firm consultant Kent Zimmerman said in time, they will do just that. When push comes to shove, clients want excellence, and “the result is more important than the price,” he said.
Knowing this, Big Law continues to play the associate pay raise game every few years. Why? The firms want to hire top talent from elite law schools and fear that if they don’t match the minimum compensation scale, they risk being seen by recruits as second-rate. The logic goes something like this: If they don’t get the top recruits (who they assume will follow the money), they will have trouble justifying high billing rates, which in turn will lead to lower compensation for equity partners. The system, in other words, perpetuates an industry motivated by money.
And it becomes a feeding frenzy. So don’t assume we’ve seen the end of the 2021 Raise Race. Some of the top earners, such as Kirkland & Ellis and Latham & Watkins—both global firms— haven’t yet weighed in. Nor has Cravath, Swaine & Moore, which used to be the firm to set the pay scale. Expect to see a slew of firms take the plunge this week.
Meanwhile, as I wrote in last week’s Global Lawyer briefing, all the money in the world will not help associates’ mental health, which is rapidly deteriorating industry-wide because of the pressure young lawyers are under. And while Big Law is making some effort to address this, it’s not clear that the increased salaries, which incentivize lawyers to be motivated by the mighty dollar, will help. They could even hurt.
So what can be done? In-house legal departments are seeking ways to help stem this mental health crisis. GCs told London-based reporter Varsha Patel that outside counsel should be more transparent about their workloads and the pressure they’re under so in-house lawyers can take this into consideration when making requests and demands. They added that more in-house legal departments should start establishing certain criteria that firms need to meet to receive a mandate, just as they do to ensure diversity. One such requirement would have clients insist that outside counsel stop using the billable hour as a means to measure an associate’s value. Another would have clients monitor their outside counsel to ensure that lawyers are not working excessively during non-working hours.
Once again, it remains to be seen who holds the reins of power in the law firm-client relationship. Stay tuned. Law Firm Hiring and Expansion Around the World
While law firms will be funneling more money into associates’ pockets, some are also expanding globally, adding to their head count or establishing new offices as they cope with higher workloads and anticipate growth in certain markets.
In the Middle East, where M&A activity continues to surge, Baker McKenzie added three new partners to its corporate practice in the United Arab Emirates, poaching from King & Spalding and Linklaters.
And the Middle East disputes boutique Mantle Law, was launched by a former Clyde & Co partner last year, plans to to expand into the U.K. in the coming months. The firm focuses on arbitration and disputes in the construction, infrastructure and energy sectors.
Middle East correspondent, Peter Shaw-Smith, wrote about the success that U.S.-based Reed Smith has found in the region. The firm has had an on-the-ground presence there for 40 years, but it sees more work coming. In April, it added senior associates to its global corporate group in Dubai.
Firms are growing in Europe as well. In Madrid, Pinsent Masons established a tax practice with a hire from Herbert Smith Freehills. In Amsterdam, Deloitte Legal added a new partner and practice leader in financial services—the third arrival at the Big Four legal arm in the Dutch capital since the beginning of the year. In Germany, Latham & Watkinsgrabbed an M&A duo from Baker McKenzie, including its EMEA private equity head.And in Portugal, Abreu Advogados added two partners to strengthen its hand in insurance and aviation as well as in the Angolan legal market. The firm is noted for its presence in Africa—particularly in the former Portuguese colonies of Mozambique and Angola.
Meanwhile, Africa-focused ASAFO & CO boosted its projects practice in London with the hire of a partner and legal director from Holman Fenwick Willan (HFW), bringing Africa project finance expertise.
And in Africa, Andersen Global entered into two new collaboration agreements with African law firms—in Lesotho and Tanzania—putting it on track to meet its target of being in 49 of the continent’s 54 countries by the end of this year.
Anderson Global also expanded further in Latin America and the Caribbean, forming collaboration agreements with law firms in the Dominican Republic and in Antigua and Barbuda. The firm now has an extensive presence across the Americas with collaboration agreements in 17 countries in Latin American 20 in the Caribbean.
Latin America has been receiving a lot of recruiting attention lately, with several firms hiring Latin America specialists to work in their U.S. offices. Two such moves came last week: Foley & Lardner hired a corporate senior associate from DLA Piper who specializes in Latin America and is based in Silicon Valley. And PAG Law, a U.S.-based Latin America-focused law firm that works closely with startups, recruited two Miami-based partners—one from Holland & Knight, and the other from Squire Patton Boggs—amid a rise in business-related disputes that seek resolution in Florida and elsewhere in the U.S.
And yes -- count on more global firms to be bolstering their disputes practices if they haven’t already. Reporter Bruce Love wrote that large law firms are expecting international arbitration work to steadily pick up after matters were put on hold during the pandemic last year, and they’re looking for experienced alternative dispute resolution lawyers to fill that demand. Pride and Diversity
Finally, to help mark Pride Month, I recommend you check out the interview that Latin America correspondent Amy Guthrie did with Randy Bullard, who is co-chair of the Latin America desk at Morrison & Foerster and co-chair of the International Bar Association’s LGBTI Law Committee. Bullard has built an impressive decades-long career as an openly gay lawyer working in a region and practice area that’s known for macho attitudes, and he has a lot to say about advocating for LGBTI and other diverse lawyers around the world.
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