US Firm Bonuses in London: The “Cravath Scale”
Base salaries and bonuses paid to Associates by elite US law firms are often referred to as being matched to the “Cravath Scale”. This is in reference to a long-standing tradition, whereby Wall Street headquartered firms wait for Cravath, Swaine & Moore to announce their Associate salaries and bonuses for the year, before promptly matching (and occasionally marginally increasing) them. Initially, this practice was driven by competing partnerships wanting to make a public showing of their profitability (and to avoid losing face amongst contemporaries by paying their people less). Cravath aren’t always the first firm to announces. Davis Polk beat them to the punch in 2014, but as soon as the first top Manhattan firm announces their numbers, a flurry of memos and internal communications are leaked to the legal press, setting the scale for that year for the rest of the market.
In London, a number of the major US firms also pay their UK Associates bonuses matched to the Cravath Scale. Unlike base salaries, the FX rates used to convert bonuses from US$ into GB£ tend to be the spot rate at the time they are paid (December / January). One exception to this in 2017 was Debevoise, who used a blended FX rate from the previous 6 months. For the 2017 bonuses the most commonly used FX rate was 1.245.
Unlike most of their UK counterparts, the elite US firms in London don’t require their Associates to hit billing targets to qualify for a bonus, they just need to be in good standing at the firm.
The London offices of the following US firms match the Cravath Scale:
Akin Gump Strauss Hauer & Feld
Cadwalader Wickersham & Taft
Davis Polk & Wardwell
Debevoise & Plimpton
Gibson Dunn & Crutcher
Kirkland & Ellis
Latham & Wakins
Milbank Tweed Hadley & McCloy
Simpson Thacher & Bartlett
Sullivan & Cromwell
Skadden Arps Slate Meagher & Flom
Quinn Emanuel Urquhart & Sullivan
The major US Firms not matching Cravath Scale for UK Associates:
There are no billing targets to hit, bonuses are discretionary with no transparency as to how they are calculated. Anecdotal evidence would suggest they come in around 5-20% of base.
Shearman & Sterling
Associates must hit a 1650 billing target to qualify and metrics behind the bonus calculation are not also disclosed, ranging between 5-20% of base.
White & Case
Associates billing over 1850 hours are eligible for a bonus. There are additional awards for those billing above 2000 and 2300 hours (at this point their non-chargeable work is also included in their contributing hours). The exact percentage paid however, is not explicitly linked to the total hours billed and tops out at 30%.
King & Spalding
Operate an hours target of 1850, after which Associates qualify for a $10,000 bonus (converted to GB£ at an FX rate set by firm). Guidance is that Associates can expect an additional $60 bonus per billable hour. However, the exact amount is then decided in the US by the head of the Practice Group.
Two thirds of the firms matching the Cravath Scale for London Associates are already members of the Third Way Legal network - confidentially see which of them are hiring in your practice at your level by setting up an account today.
The scale for 2017 is as below