Wednesday, September 9, 2009

Open Thread - Law Firm Compensation (Revisited)

Several months ago, we opened a thread putting forth a commenter's proposal for changes to law firm compensation that would help firms "cut costs and still harbor and nurture their talent." While the proposal was most readily criticized for its initial pay-scale ranging between 90 and 135k, a pay cut to that level may be on the horizon--albeit in a considerably different manner than that suggested by our commenter.

As legal consultant Jim Cotterman explains on the Altman Weil blog:
[A]ssociate compensation still appears out of line. The reductions announced so far are about half of what is probably required (i.e. going from $160,000 to $145,000 should probably go much further to $125,000 or even $100,000); thus resetting the wage scale by a decade. This is a painful reality and one that surely will fire up emotions. But the tide has changed; clients are moving quickly and assertively to reduce legal spend. This goes beyond alternative fee arrangements (AFAs). Costs of outside legal bills are going to come down, and from the early signs — down dramatically. Services will be competitively bid, outsourced, off shored, converged, internalized, re-engineered, and even forgone. Now add the AFAs to create greater certainty regarding total cost along with a healthy measure of risk transfer from the client to the law firm. All of this will bring the major line item in any law firm — the cost of people — under assault. This will affect total employment, wage scales and job expectations. The pace of the salary change is directly affected by the pace of change in what clients will pay for legal services.


  1. Cotterman is presupposing an ultimate conclusion that firms will abolish the billable hour model. So far, that has not happened. Even so, associates are paid (and have always been paid) in accordance with what they bring the firm. 160k may be too much, but Cotterman offers no evidence that 100-125k is a more appropriate number. Why?

  2. When law schools cut their tutitions by 2/3, come talk to me.

    Otherwise, this is b.s.

  3. Tutition has NOTHING to do with how much atty's get paid. Different beast entirily.

  4. 5:17, that might be true, but it shouldn't be. Going to professional school should be an investment (probably an expensive one), but it shoulnd't be wildly out of line with the salaries that graduates will make entering the profession. Law schools have raised their tuition rates a lot over the last 10+ years (the same period where raises are being considered in the quotes part of the article)-- if we're resetting salaries, we should be resetting, at least to a degree, the debt required to reach those salaries.


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