Friday, October 19, 2007

Lawyers of Fortune

During my interviews with firm partners, sometimes the topic of recruiting would come up and they would mention how competitive the market was for top associate talent. The solution, it would seem, would be to act like the business world and offer signing bonuses.

But in the legal profession, NALP (the National Association for Law Placement, and membership is required if firms want access to on campus interviews) has several guidelines that they make all firms adhere to. The guidelines were created to "promote fairness and informed decision-making during the recruitment process." Among the prohibitions for employers are no signing bonuses, no exploding offers, and the need to keep offers open until 12/1.

I understand the part about exploding offers and the 12/1 deadline, since they're meant to prevent employers from pressuring students.

But what I don't understand is the part about no signing bonuses. Generally speaking, I think that the free market could play an important role in terms of recruiting. Indeed, there are L.A. firms that pay NY market and those that pay below NY market. In terms of attracting associate talent, having firms pay extra for the students they really want is not that strange an idea. After all, law schools pay " signing bonuses" in the form of scholarships to get the students they really want.

Even though I've already decided, for many classmates, the current decision process basically entails choosing the firm where "they really liked the people and the culture." But if something like signing bonuses were on the table, it could definitely be a great tool to distinguish firms from each other. Furthermore, firms pay clerkship bonuses as a clerk recruiting tool and I don't see why the same philosophy can't extend to signing bonuses.

A possible critique of signing bonuses is that they're also meant to pressure students, and that's a bad idea. Well, not really. Sure, they're meant to present a meaningful financial incentive to students who might not really care about where they go--lawyers of fortune. But for those students who really care about "people and culture," signing bonuses should not factor into their decision. Thus, signing bonuses would be quite market efficient, as they would affect/pressure only the people who care about money over culture.

The real reason I think that bonuses are outlawed is that NALP doesn't want the stratification of law firms. If (profitable) firm A is willing to pay a $10,000 signing bonus while firm B is only willing to pay $5,000, NALP fears that stratification would occur--that people would view firm A as better as firm B, and thus potentially jeopardize the cohesiveness of legal employers. But such an argument likewise is faulty, since firms are already stratified (every law student looks at Vault and AmLaw anyway). In short, NALP prohibits signing bonuses for self-interested reasons: to prevent the firms who can't afford to pay signing bonuses from jumping ship and depriving NALP of membership revenue.


Blogger buffalodawg said...

Is the market really that competitive for top associate talent? Plenty of people in the top 10% at my tier one school have only one offer. Perhaps its a regional thing.

8:06 PM  
Blogger divine angst said...

The signing bonus can play a part later. Vincent & Elkins, for instance, pays a $5,000 bonus when former summer associates accept their offers of association. Now, it's not a true bonus--it comes out of the summer bar stipend (or first month's salary) for those associates, but it serves the same purpose. V&E has a different incentive--everyone in the Texas market splits, so they want to entice splitters to choose THEM over their other firm. But there are a variety of ways such a bonus could play into recruiting, too.

9:09 PM  
Blogger The Fox said...

bdawg: can't say nationwide, but at least in the LA market where UCLA is the main player, the top people here basically get their choice of firms.

d.a.: I think that firms realize that signing bonuses are effective and would gladly do so if it weren't for NALP.

9:35 PM  
Blogger M.T. said...

Doesn't this overlook the fact that we're all choosing firms during 2L year and THEN spending a summer at the firm.

Are you proposing a signing bonus when you choose what firm to spend your 2L summer at, or a signing bonus for when you ultimately accept an offer of employment?

I don't think it would make much sense to offer signing bonuses.

9:14 AM  

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