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The penalties of un-bonuses: uncertainty, undue influence, and unequal portions

Bonuses in law departments are not a sure thing. When recruiting lawyers, those who do so owe it to candidates to accurately describe the likelihood of the new lawyer receiving various bonus amounts. After all, sometimes bonuses dry up. This boom-or-bust uncertainty is not the only lash of bonuses.

A second drawback needs some history. For a number of years, I (and others) have thought the trend was to move more in-house compensation toward bonus and away from base. Many applauded that at-risk orientation as a prod to more productivity.

A counter to that shift – the undue influence problem of bonuses – is that linking a lawyer’s pocketbook to business outcomes can erode that lawyer’s professional objectivity. To the degree that the law department is a risk control function, you hardly want to encourage bonus-seeking lawyers to wink at legally-risky business ventures. (See my post of Nov. 24, 2005 on weighting the determinants of bonuses.)

A third downside of bonuses involves perceptions (or realities) of internal inequity. It galls lawyers to find out or guess that they have worked as hard as someone else, and done as well, but the other lawyer got a bigger portion of the bonus pool.

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