General counsel compensation

It has always been considered rude to discuss money – or, more accurately, how much a person earns – in polite company. But it seems everywhere we turn money is nearly all people want to talk about. Compensation of CEOs, Wall Street bankers, hedge fund gurus and constant comparisons to the ‘average’ man dominates headlines. We are even going so far as to consider writing laws to govern what a person can be paid.

As everyone else is doing, it why shouldn’t we?
 Everyone wants to know what others are paid, especially people we consider peers. There’s nothing wrong with 
it and, in the case of general counsel and in-house
 governance professionals, it can make for very 
interesting reading.

Everyone knows the past two years have not been particularly good financially. CEOs and other business leaders have come under significant pressure over the size of their paychecks, and some have actually taken pay cuts. But bad times for some can be good for others. With corporate governance rising in importance and almost becoming a household term, people who work in the field have seen salaries grow alongside the rising awareness. It can be extremely challenging and stressful and often demands long thankless hours, but it is possible to make a very good living as an in-house counsel.

Calculating what a general counsel, corporate secretary or compliance officer makes is not easy, however. Rarely do these functions fall into the named executive officer category – slightly less than 20 percent do so at Fortune 1000 companies – so details of compensation do not need to be publicly disclosed. In order to find out, Corporate Secretary turned to two leaders in the field of compensation analysis: Equilar for the US data and legal recruitment specialists Laurence Simons for international data.

Aiming for the top
The best place to start when talking about salary is usually the top, so what did the highest paid in-house counsel in the US make in 2009? According to public filings, the highest paid individual received total compensation of a little over $10.1 million. This compares with the top paid general counsel in 2008 (at least for firms that disclose on the proxy) of around $9.7 million, received by Greg Doody at Calpine who did some outstanding work leading the company out of bankruptcy and cutting debt.

There may well be lawyers making more than that but, because they are not among the named executive officers, their compensation would not come up in public filings. This compares with an average, according to Equilar’s In-Depth Top General Counsel Compensation Report, of $1,482,922 for the Fortune 1000 (Equilar’s report includes some data that are not publicly available and thus gives a much broader picture). Nice work if you can get it.

While less than one fifth of general counsel personnel are among the top five named executive officers, the rest of them do not miss by much. The average pay rank for a general counsel at a Fortune 1000 company was seventh (in the firm) for 2009. The percentage of those making the top five is much greater at companies with market caps above $20 billion, as is total average compensation ($2,325,181).

As might be expected, seniority and position within the firm are important determinants of compensation. General counsel who report directly to the CEO and are named executive officers make almost 33 percent more than their peers further down the management ladder. If you want to get paid more, therefore, either force your way up the management reporting line or move somewhere that allows you to report directly to the CEO.

But before you start polishing up the resumé and sending it off to the biggest companies you can think of, bear in mind that market cap and revenue are not always linked to the highest paid general counsel. The best-paid sector, on average, according to Equilar, is technology, with retail bringing up the rear.

What’s my motivation?
Money is not the only reason people work – or move jobs. According to Laurence Simons, which spoke with more than 1,900 in-house lawyers internationally, the top two reasons cited for changing jobs are career development and wanting a new challenge. A large percentage of people also indicated in the survey that they would seriously consider moving overseas.

Before you call your local language school, however, consider this: US lawyers get paid a lot more than almost everyone else. If you do decide to relocate, start with Switzerland, then the UK, Luxembourg and Germany for the highest base salaries and some reasonable benefits.

While outside lawyers may make more money, it appears very few in-house lawyers (4.2 percent) would consider starting or returning to outside practice (see Where to next? for more details).

Overall, it looks like general counsel and other in-house lawyers did quite well for themselves during 2009, and many did better than the previous year. Perhaps, as the saying goes, no matter what happens, the lawyers always win. Possibly, but most are working a lot harder for it than in previous years. What is worth noting, however, is the increased use of performance-related bonuses and stock plans for in-house lawyers. It seems pay for performance is not just an issue for the CEO.