Salary Wars Pit Associate Pay Against Partner Profits
Associate pay hikes have taken a bite out of profits for equity partners, according to some leaders of California law firms.
Many large California firms matched their New York counterparts last year and agreed to pay starting salaries of $160,000 to new associates. Something—or more accurately, someone—had to give, the Recorder reports.
“The fact is that we only passed on much less than half of the associate salary increases onto the clients, and the partners have absorbed more,” Guy Halgren, the chairman of Sheppard, Mullin, Richter & Hampton, told the Recorder. “The partners made less money.”
The two biggest costs for law firms are associate compensation and the cost of office space, amounting to about 80 percent of expenses, O’Melveny & Myers chairman Arthur Culvahouse Jr. told the legal publication.
“When you have substantial increases in one of the big expense drivers, it has to affect profits,” he said.
