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| MEMO to LA Greedy Partners Re SALARY (this is not BS, is accurate and true, please pass along) |
notsofastgreedypartner |
February 25, 2006 01:05 am |
To: Greedy LA Big 3 Partners
From: Not so Unhappy Associate
CC: All Greedy Partners
Date: February 25, 2006
Re: Compensation Myths
Dear Greedy Partners:
Although I do not consider myself a greedy associate, I can no longer take the hypocrisy that is spewed from the mouths of greedy partners regarding associate compensation. Please spare me the rhetoric regarding how much you made when you were associates. Like the age old simile, that is comparing apples to oranges. Your comparison should be between your compensation and that of the partners when you were an associate.
I have put together a few figures and graphs for your review . It is actually quite simple. First, let me inform you of the assumptions, which I think you will agree, are indisputable.
First, law school (and undergraduate for that matter) tuition has sky rocketed. As you know, most of your new hires come fro top tier schools (opining nothing on the merit of this practice) and tuition and expenses at those most of those schools are in the $40,000-$50,000+ range per year. As a result, new associate education debt is significantly more than it ever was for you.
Second, billing rates and hours requirements are significantly higher than when you were an associate.
Third, related but significant, investment bankers (MBA associates) are in direct competition for talent, whether before graduate school (often) or after (frequently).
Fourth, first year investment banking associates at top tier firms can expect to earn anywhere from $225,000 to $300,000.
Fifth, while I am not suggesting law firms match the investment banking pay scale, it hardly seems plausible that a first year banker can be worth nearly double a first year associate. Furthermore, the pay differential only widens as years pass (mid-level and senior associates are grossly underpaid). If you do not think this is a factor, watch as the talent pool continues to move toward the more lucrative banking or the more humane consulting.
Sixth, PPPs have expanded significantly in last decade, and, associates have not received a fair share (of course recognizing that fair is not necessarily equal).
Compensation
[chart]
Growth Rates
[chart]
In case it is not evident, let me point out a few facts. PPP at this firm has increased 260% versus 115% for associates over the last ten years. Annualized growth rates for partners and associates are 14% and 8%, respectively. First year pay has gone from approximately $75,000 to $150,000, while partner pay has gone from approximately $500,000 to $1.8 MILLION.
Partners have reaped the benefits of their own hard work, but also that of their associates. They have taken more than double the profit in terms of percentage increases and hugely more than that in terms of actual real dollars.
In short, when you give $5,000 raised to all but first-years and fail to match modest $20,000 raises (which I believe I have shown are inadequate), you decrease moral and make me (and many others) want to leave a job that has been at least tolerable and at most satisfying.
Please spare me the New York cost of living argument because if that is true, why do associates in offices outside of Los Angeles and San Francisco (and New York) make the same salary. Is it not more expansive to live on the West Coast than the Midwest, South or Southeast?
I hope you take this memo seriously because I do. It is not meant as a slap in the face, but rather a simple dose of reality. I hope it does not fall on deaf ears.
Best regards,
Anonymous
NOTE: These figures represent the compensation at one of the Big 3 in Los Angeles (I will give you the joy of figuring it out). While I cannot claim that the figures are 100% accurate, they are substantially reflective of the economic reality of the compensation and I would challenge anyone to produce evidence to materially dispute these figures. Please also note that I have used first year associated figures as they are the easiest to find data for past years. This should not in anyway detract from the fact that mid-level and senior associates are grossly underpaid. Additionally, while based on a Los Angeles firm, these trends can be seen at nearly all firms across every legal market.
Source Data:
Year Associate Compensation Year over Year Growth Growth since 1995 Annualized Growth Rate Partner Compensation Year over Year Growth Growth since 1995 Annualized Growth Rate
1995 72000 $500,000
1996 77000 6.94% $575,000 15.00%
1997 80000 3.90% $650,000 13.04%
1998 95000 18.75% $815,000 25.38%
1999 107000 12.63% $905,000 11.04%
2000 130000 21.50% $1,000,000 10.50%
2001 130000 0.00% $1,100,000 10.00%
2002 130000 0.00% $1,200,000 9.09%
2003 135000 3.85% $1,300,000 8.33%
2004 145000 7.41% $1,500,000 15.38%
2005 155000 6.90% 115% 7.97% $1,800,000 20.00% 260% 13.67%
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