A colleague forwarded a two-page memo which appears to have been authored by Miguel R. Rivera, Sr., Associate General Counsel of Wal-Mart .
In a seemingly unprecedented move, the company has decided to tighten its belt on its escalating legal costs and, in turn, is hitting the nation's biggest law firms where it hurts most: their wallets.
Objecting to the $160,000 annual salary for "inexperienced" first-year New York City lawyers, the company has imposed a "moratorium on across-the board rate increases" and indicates that it will only consider "reasonable, individual requests for rate increases for those attorneys ... who are performing at an exceptional level and whose experience and knowledge is adding substantial value toward meeting Wal-Mart's legal objectives."
Who is to be the judge of what is "reasonable" and who are "exceptional?" Why, Wal-Mart , of course.
Our favorite part of the memo reads as follows:
The salaries that law firms choose to pay their junior associates are none of our concern. We have every reason to be concerned, however, about the impact of salary hikes on law firm billing rates. Based on the size and frequency of the rate increase requests that we have seen over the past three years, it appears that many of the requested increases are largely attributable to the steady, nationwide increase in junior associate salaries. In turn, it appears that that the steady climb in first-year associate salaries -- and the effect those annual adjustments have on salaries for more senior associates -- may also be contributing to the push in larger markets for partners to break what's been described as the "$1,000 per hour barrier."
In some respects, law firms secretly agree with Wal-Mart .
Spiraling salary costs have gotten out of control and are in need of being contained.
The income expectations of many young lawyers are out of whack with any reality we know or can comfortably embrace. And if this trend were to continue unabated, it would likely pose a very real hardship to smaller firms vying for some of the profession's best talent. (In addition, if firms must pay more in order to be competitive and retain talent, that inevitably translates into higher legal costs for clients, and makes representation of the "average joe" significantly less affordable.)
Of course, it's hard to feel sorry for our friends at Wal-Mart . In 2006, the company reported some $11 billion in profits and its President and CEO, H. Lee Scott, Jr. , took home some $10 million+ in salary, bonuses and perks. (How about a moratorium on executive compensation, Mr. Rivera?)
It will be interesting to see how this all pans out. (If we were to venture a guess, we doubt Wal-Mart will tolerate any resistance from its outside counsel. After all, we're talking about a company whose slogans are: "Always low prices. Always." And, "Save Money. Live Better.")
To download a copy of the memo, please use this link: Walmart memo (November 1, 2007)