The Logic Behind Law Firms' Bonus Matching

Are law firms "absolutely irrational, economically speaking" in awarding matching bonuses to associates each fall, as Andrew Ross Sorkin asserted in his Dealbook column in Sunday's New York Times? Not really.

Cravath, Swaine & Moore started the annual tradition by announcing special bonuses to associates of $10,000 to $50,000 in addition to regular bonuses of $35,000 to $50,000, based on seniority. Debevoise & Plimpton matched within days, and . .  . well, you get the picture.

It is reflexive and expensive, but not necessarily illogical. Law firms can't get past the simple math in what has been dubbed "the war for talent," says Ward Bower of the law firm consulting firm Altman Weil.

Of the 40,000 law students who graduate each year, only 2,000 to 4,000 of them come from top schools. Otherwise, they're pretty much indistinguishable from each other—at first. Eventually, of course, the best associates become clear and are invited to become partners, but it takes a while for top performers to distinguish themselves.

So the starting salaries and the bonuses are "matchy-matchy" to encourage associates to stay on the plantation rather than risk having a recruiter at another firm poach the best prospects—at least until management sorts out who will be made partner and who will be invited to leave.

"They want to make the choice and not have the associate make the choice," says Bower.

by Karen Donovan