To cope with an ongoing decline in business and rising costs, Ballard, Spahr, Andrews & Ingersoll L.L.P. is cutting compensation for its more junior lawyers.
The move follows cuts of nearly 170 support staff positions in the last year and a half, made up of layoffs, attrition and the elimination of unfilled positions.
The firm declined to comment yesterday on the salary cuts, saying that as a matter of policy it would not discuss compensation of its lawyers. But legal-community observers said the firm's 238 associates had been informed their pay would be reduced.
In cutting associates' salaries, Ballard joins a growing list of firms in Philadelphia and around the country seeking to trim compensation for lawyers below the partnership rank. Many have delayed start dates for first-year lawyers. Others, including Reed Smith L.L.P., a huge Pittsburgh-based firm with a large office in Philadelphia, have said that they, too, were cutting the salaries of associates.
As a practical matter, such salary cuts mean that associates will share some of the fiscal pain that partners in the beleaguered firms recently have endured, although on a much smaller base.
Ballard disclosed earlier this year that its per-partner profit had declined 24 percent, from $545,000 in 2007 to $415,000.
Such declines make law firms' leaders nervous because profit erosion can trigger defections of big-fee generators.
First-year lawyers at Ballard had been starting with an annual salary of $145,000 in the Philadelphia office. The legal blog AbovetheLaw.com reported yesterday that salary cuts for associates would average 14 percent.
Until a year or two ago, the 515-lawyer firm had experienced rapid growth. It opened an office in Phoenix in 2006 and an office in Los Angeles the following year, while picking up a large intellectual-property firm in Atlanta last year.
But such acquisitions often are costly, and in the midst of a downturn can greatly strain a firm's finances. Ballard chairman Arthur Makadon recently was quoted as saying that the Los Angeles and Atlanta acquisitions had intensified the difficult financial challenges facing the firm.
Reed Smith, which has about 150 lawyers in its Center City office, said it would cut salaries of U.S.-based associates 10 percent starting July 1. In late March, the firm laid off 74 staff and 26 lawyers in the United States and in its London office. The announcement followed layoffs at Dechert L.L.P., and the decision at Wolf, Block, Schorr & Solis-Cohen L.L.P., a venerable Philadelphia institution, in late March to dissolve as a result of partner defections and declining business.