Doesn't this beg the question of how much remuneration is too much for the partners in those firms? Doesn't too much remuneration for partners, however much too much is, have the same "negative" effects on them as Mr. Sandman imagines it to have on associates? And when he admits to lack of "economic" understanding about the marketplace for legal services, who would doubt him?

[Full disclosure: I am the father of a first-year associate in an NYC firm who while we were on a family trip to China in January clicked on her Blackberry and was pleasantly surprised to receive word that she was getting a 10% raise.]

As a soon to be 1st year associate at a big NYC firm, I'd like to ditto neurodoc. Though I personally plan to save much of what I will make, and not come to depend on the money, it is a bit hypocritical of Mr. Sandman to warn associates of the dangers of liking money too much, while in the same breath implying that nothing is more important than partnership profits.

Partner income is based more on rainmaking than on providing legal services. Associate income is based more on providing legal services than rainmaking. Which do you think most clients would prefer paying for?

Whose compensation is really driving up hourly rates unsustainably?

Chris, you are obviously right, but Arnold &Partner is a proper Freudian slip, under the circumstances.

I'm a 3L at a 4th tier and I will graduate without a job lined up so I don't have any bone in this fight. However, I think, if anything, biglaw associates don't get paid enough. They work a lot of hours. There is no guarantee of making partner. Compensation during the later associate years doesn't go up all that much.

I think that biglaw relies heavily on the 20% attrition rate. They want to work the biglaw associates hard and then have them quit so they don't have to give them raises later. Otherwise, why recruit every year? What other industry recruits so many inexperienced works at such subjectively high salaries?

The article is also disingenous because it ignores the fact that most law school graduates will not get hired by big law. I would guess that probably less than 10% of law school graduates become biglaw associates. If Mr. Sandman wants biglaw associates to be less "greedy" he should encourage law firms to hire more associates at less cost. (I don't think this is necessarily a great idea since I think if you worked hard in undergrad and law school and did well, you should be rewarded with great, again subjectively, compensation.) Oh and of course, some biglaw firms do this by hiring tons of contract document reviewers.

In our capitalist society people are paid, for the most part, based on their perceived ability to generate capital combined with the rarity or ubiquity of their talents.

Associates at big law firms are expected to bill around 2,000 hours at a billing rate of $200.00 to $300.00 (sometimes more). Therefore, they can generate capital for the firm of $400,000 to $600,000 per year. A salary to them of $160,000 per year is hardly excessive on that basis.

The notion that only a graduate of a top tier law school is worth that kind of money or whether or not what a first year assocate does is worth what is billed to the client are separate matters. Frankly, I doubt it in either case. However, customers of big firms appear to believe that they are getting the value they are paying for or else they wouldn't be paying it.

Does anyone else get the feeling that just maybe, just an eensie weensie bit, he does begrudge associates a good living?

I recall that when I was in law school, and on the Law Review, that a friend of mine interviewed at one of the world's largest law firms. Now, my friend was a nice guy, but pretty much devoid of personality. He had virtually no interests outside the law.

After his interview, I asked him how it went, and he said very well. One of their questions was whether he had any outside interests, other than the law. He proudly told them no. I was shocked to hear this, and asked what their reaction was. He said that they really liked the answer. I almost fell off my chair.

He got the job, stayed for many years and enjoyed working for them. Turns out none of the people he worked with had any outside interests either, so they could devote their entire lives to the law firm. Everyone was happy.

Who am I to criticize?

I work at smalllaw, a firm that hired me because I have a family and responsibilities. The money is good, the stress is low, and I don't have to deal with arrogant, lazy, and greedy partners. In a way, I feel sorry for those who get caught up in the biglaw thing, from that first job out of lawschool to the holy grail, the partnership.

I don't know what James J. Sandman was practicing but it sure wasn't anti-trust law.

His cluelessness is both extremely revealing and extremely frightening in a former managing partner.

Higher salaries inevitably mean higher billable-hour expectations and even less work–life balance.

Short of moving all the associates to Mars, there is no practical way to squeeze more much more than 2000-2200 annual billable hours out of them. Increases in associate salaries have to be made up up in either higher hourly rates or lower partnership profits.

Moreover, the idea that partners will be happy letting associates bill less hours if they paid them less doesn't pass the laugh test. Associates are paid a monthly salary but bill hourly. Every billable hour an associate works means more partnership profits. So there is every incentive for partners, as a class, to work associates as hard as possible, regardless of how much the associate's salaries are.

No kidding on the antitrust point.

But I don’t understand what causes a firm be the first to increase the salary of a brand-new lawyer from an already eye-popping $145,000 to $160,000. There is no competitive advantage in doing so. Other firms will surely follow suit, and the firm that led the market will quickly be indistinguishable from the rest of the pack.

So what firms should do is get together and collectively agree to set a lower salary for first year associates, allowing them all to keep their costs down. No problems there, right?

There is a lot of truth in the comments and in Orrin's post. This conundrum has been present in law practice for at least the past 40 years, since I began practice. It is not likely to change, so long as the billable hour continues to be prime method of billing for legal services.

A "cost plus" contract (which is the typical for performing big firm legal work) encourages long hours and staffing a lot of people per project. It does not reward efficiency, problem solving skills or creativity. It does reward "compulsive dronism".

In my experience, sophisticated purchasers of legal work only employ this model when it is absolutely necessary.

Big firms bill $160.00 hour for associates just out of law school?

most associates were at 2500+, and 3000+ was not unheard of.

I do not believe anyone can bill 3000 hours per year without some degree of double billing or dishonesty. How this squares with a lawyer's ethical duties is anyone's guess.

C'mon, working every day, 3000 hours is only 8.2 billed hours/day. Even when you account for the three weeks of vacation that one of the associates took, you are still looking at fewer than 9 hours billed/day. What made this associate particularly impressive is that he managed to bill this many hours while lowering his handicap in golf.

I work hard, do my job, have weekends off, take my vacation time, and seldom work more than 8 hours a day. I like my work; I love my family. That's why I work for the government.

While I don't make as much as first year associates at major firms, I do have a life.

While theoretically possible to bill even 2400 hours a year w/o giving up weekends, how many do you think honestly do so without at least some times during the year billing for more than one hour's work in one clock hour? While sitting at your desk and not doing any overhead?

2,000 hours a year is 40 hours a week for 50 weeks. If you include overhead, CLE, breaks, lunch, dinner, talking to the girlfriend or wife on the phone, etc., you have to be up around at least 50 or so hours a week just there.

Bruce, the people in those firms who are getting to 2400 hours are generally assuming that they're going to be eating dinners at the firm and coming in at least one day over the weekend. Are you suggesting that it's unreasonable to think folks are legitimately billing that much? Because it seems utterly plausible to me, given what I've seen people do to their lives to get to those numbers. All the more reason to make responsible choices about the salary one receives and the other aspects of one's life.

Could you imagine if Sandman was your boss, and came to you around holiday time and said:

Don’t become dependent on the money. Live below your means, and be generous. Once you’ve got your educational debt under control, do what you want to do because you love it, not what you have to do to maintain a lifestyle. Remember why you went to law school: to make a difference. And follow your heart.

I'm not sure I'd take it well.

Everyone is assuming that salary competition occurs solely among law firms. But what I've heard from BigLaw lawyers, and what makes sense to me, is that many of the top law firms are competing with financial services firms that usually pay much more. There is a skill overlap between BigLaw associate and financial services workers. Many associates join law firms because they like being lawyers, because they are risk averse, and because the pay is good. But if the rewards of joining a hedge fund or private equity firm become too much greater than being a BigLaw associate, it will become more difficult for BigLaw to draw top candidates.

I think Sandman is really lamenting how we can't put the genie back into the bottle here. Every law student knows (or should know) the deal you're getting once you join a big law firm: "work for us, bill what we say, and we'll pay you a transparent salary." What they are NOT saying is "bill what we say, and you'll make partner." Lifetime employment at a BigLaw is not guaranteed, and the premium salary you get paid represents the "risk" you are taking on, as it were, of not working there for your entire career. You either live up to the price you're being billed at or you leave. The salary reflects this reality, NOT the reality (as Sandman seems to believe, or is trying to make other law firms believe) of some high-stakes horse race law firm compensation committees are playing for the best legal talent. Believing that if big law firms paid less, they would somehow be better places to work is extremely naive; the economics just don't work that way. I wouldn't say this naive utopianism is all that uncommon in the legal profession, however.

Non-CLS 2L says "Believing that if big law firms paid less, they would somehow be better places to work is extremely naive; the economics just don't work that way. I wouldn't say this naive utopianism is all that uncommon in the legal profession, however."

In fact, though, this is exactly what happened at many very prestigious law firms prior to the 2000 salary increases. When I was a 2L, everyone knew which were the "lifestyle" high-prestige firms and which were the sweatshops. After 2000, though, the salaries went way up and the lifestyles went way down -- I wonder whether the terms "high-prestige" and "lifestyle" overlap at all any more. So, I don't think this is a naive view at all.

Sandman's proclaimed interest in associate retention is the most hypocritical part of his piece -- which is saying something indeed. Big law firms rely on a pyramid structure, with a large base of junior associates and ever diminishing numbers as one moves up in seniority. Having a large number of senior associates is not a viable option. In the event that most of Arnold &Porter's associates chose to heed Mr. Sandman's call and remain at the firm, it would respond by dramtically increasing involuntary departures.

What Sandman actually wants is to be able to pick and choose who stays and who goes rather than having the associates decide for themselves.

Furthermore, even were Arnold &Porter to change its business model, is there anyone who believes that it would significantly increase the number of available partnership spots for its senior associates, thereby cutting the income of the existing partners?

The Sandman model -- less pay in exchange for more job insecurity. Yeah, that's going bring the recruits flocking in.

Sandman also has a very feeble grasp of economics. If a firm is suffering from high-employee turnover, that argues that it is paying too little in exchange for the demands it makes, not that it is paying too much.

"When I was a 2L, everyone knew which were the "lifestyle" high-prestige firms and which were the sweatshops."

I am a 2L, and everyone still seems to THINK they know which firms are "better," "nicer," and "more collegial" than the rest. I doubt if the big firms really lived up to the reality of what they were trying to perpetuate then (you didn't say you actually worked at one of those places), and I'm even more doubtful about it now.

I did work at two of those places -- one (pre-clerkship) before the change, and one (post-clerkship) just after. At the first, I had no idea what my hours were -- I got no reports, nobody mentioned it, and it never occurred to any of us to keep track. I'll tell you that that's far from the case now. The second firm started off that way, but things quickly started to change: hours-based bonus structure came into play, people started getting reports on their hours, etc.

You ask why the high-prestige lifestyle firms didn't stay that way. There are two related answers here. The first was the rise of the "national" market (salaries used to vary from city to city) and the rise of the GreedyAssociates message boards, which became a very powerful tool. Salaries jumped in 2000 because firms (particularly in Silicon Valley) were taking equity in clients during the dotcom boom, and those firms raised salaries, and associates in other markets started asking about those salaries. Firms did it, I assume, because (1) they didn't want to lose the talent and (2) it appeared that the good times were here to last, so they could afford to do so. Within months of the jump, though, the market crashed, and the difference had to be made up another way -- i.e., with increased hours. So, I think many of the high-prestige firms believed they could do it without raising hours substantially, by taking equity stakes in skyrocketing companies.

Second, around the same time a new dynamic arose with respect to superstar partners (in DC and NY at least). Specifically, as the Clinton administration came to a close, some very big names in various fields left very high-profile jobs -- in DOJ, at SEC, and elsewhere -- and firms wanted those folks very very badly (having the former head of SEC enforcement defend you in a securities enforcement action matters a lot, it turns out, as does having the former Soliciter General argue your case to the Supreme Court). But these superstars demanded really big bucks, and the firms needed to increase profits to be able to pay them. (It's true that law firms make big money, but they don't literally print their own money -- they have to figure out ways to bill clients for it.) One way they chose was to focus much much more on the bottom line -- and that included demanding more of associates (and service partners too). So, part of it was client-driven.

Could a firm just say "we're not playing the game, and we'll stick with the 'lower hours, lower salaries' model"? Absolutely, and many firms -- including mine -- have done just that. But it's much harder for large national firms, because there's a much larger and more diverse partnership base that has to agree, and in my experience that pushes things toward the opposite model.

As you meet people at big law firms -- could be wherever you spend your summer, but ideally it will be people who have no specific interest in your personal choices -- ask the following question: "If you could, would you work here for 80% the pay if you could get a guarantee that you'd work 80% of the hours." The answers they give you will tell you a lot about the effect of huge salary increases on associate lifestyle.

I want to emphasize again that I have no dog in this fight. I'm a young partner at a firm with very few associates, and spent a heck of a lot more time as an associate. And I had huge law school debt, just like everyone. I'm just trying to point out baased on my own experience that there are two sides of the coin. At the end of the day, the position that how much one makes will bear no relation to how much one has to work for it is the position that seems, to me, with all due respect, most naive.

Sorry for the double-post above. Not sure why that happened.

One more quick point. Non-CLS 2L asks, why the high-prestige lifystyle firms didn't stand on their lifestyle offerings and refuse to raise prices. I offered my response above, but want to draw out one larger point. There's more than one market at work here -- or one very complicated market. Associate labor is obviously critical to the big firm's operation, but the big firm is a complex system. The ultimate product is the legal work-product, and the ultimate income to the firm is the revenue derived by clients. Everything else is a sub-market from the point of view of the firm. Often, discussions of associate salaries (once again, want to emphasize that I'm not "the man" here) often neglect to consider the broader market factors faced by the big firms -- things like "how much do we have to do to retain superstar Supreme Court litigator or superstar bankruptcy woman or whomever," and "what's the overall balance of what we're offering to the client." These are important too, and you should resist the belief that the import of decisions about associate salaries begin and end with the associate's relationship with "the firm."