Should Firms Cut Bonuses in Response to Clients?

Should Firms Cut Bonuses in Response to Clients?

Slashing associate bonuses isn't making law firm management popular with their subordinates, as the comments at this post at Above the Law make clear. But does it matter what associates think when clients are giving firms kudos for their parsimonious distribution of bonuses?

As today's American Lawyer reports, mega-firms like Cravath and Skadden are reigning in bonuses, either keeping them at the same levels as last year or reducing them by as much as half. And the reaction from clients has been positive; Cravath's head partner, Evan Chesler told American Lawyer that "I've got to tell you, and I don't want to name any names, but I have gotten calls from a half dozen clients this morning thanking me [about cutting bonuses]."

Though some might compliment law firms for taking clients' views into account, others in the blogosphere suggest that clients have no business telling law firms how to run their business. At the Litigation and Trial Blog, Max Kennerly explains that he'd never think to ask his blogging company, Lexblog what it pays its support people because it's none of his business:

LexBlog provides a service. I thought the fee was fair and reasonable and that I got a great service. So I paid the fee and got the service. If the salaries or working conditions LexBlog provide intentionally violate labor, employment or discrimination laws, then we've got a problem. Otherwise, I have better things to do than micromanage my service provider's business.

For Kennerly, the same analogy applies to clients. The reason that clients are complaining about associate bonuses isn't because they're trying to micromanage, but rather, they're questioning the value that the firm is providing. In fact, as Dan Hull suggests at What About Clients, clients should be celebrating, not balking about bonuses, because they provide incentive for firms to retain the cream of the crop. Like Kennerly, Hull agrees that the fact that clients are resenting bonuses is a symptom of greater dissatisfaction with the overall lack of value that many law firms provide.

As for Scott Greenfield, the formula for bonuses for criminal defense lawyers is fairly easy: You get zero, unless and until you prove yourself worthy. At which point, the bonus is more business and more clients.

What's your view? Should firms cut bonuses in response to pressure from clients?

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Posted by Carolyn Elefant on November 24, 2008

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