Bird of pay
The corporate pay perch is getting more crowded near the top. Median compensation for S&P 500 Index general counsels is up almost 23 percent since 2010, compared with 15 percent for chief executives and 17 percent for chief financial officers, according to executive compensation firm Equilar. It’s another sign that more companies are choosing to handle chunky deals, thorny lawsuits and regulatory issues in-house.
A general-counsel slot used to be the consolation prize for big firm attorneys who failed to make partner. Cost-conscious corporations began to realize in the late 1980s, however, that they could use law departments instead of pricy firms for many legal matters without sacrificing much in quality.
General Electric was a pioneer, hiring former U.S. Supreme Court clerk and law firm partner Benjamin Heineman to create a top-notch legal group. Some companies even elevated their general counsels to management’s highest ranks. Former Citigroup Chairman and CEO Chuck Prince comes to mind.
The reward for more responsibility has been a hefty boost in compensation. Median pay for general counsels was more than $2.1 million in 2014, up from about $1.7 million in 2010, according to Equilar. Near the top was Walt Disney’s Alan Braverman at over $6.7 million in salary and bonus. That’s a far cry from CEO Robert Iger’s roughly $23.3 million, but a nice chunk of change nonetheless.
Some of this in-house largesse is probably at the expense of outside attorneys. U.S. law-firm revenue growth was 3.6 percent for the first nine months of 2015, down from 4 percent for the same period last year, according to Citi Private Bank. Much of that growth came from higher billing rates. Demand for legal services actually slowed, Citi reported. The results reflect a generally downward trend for law firms since the 2008 financial crisis.
Top-rank firms like Skadden, Arps, Slate, Meagher & Flom and Wachtell, Lipton, Rosen & Katz will, of course, continue to thrive. Even the most sophisticated corporate law departments wouldn’t risk handling billion-dollar deals or high-stakes litigation on their own.
Yet increasingly complex cases are landing within the remit of in-house legal eagles. It’s one reason law firms should brace themselves for an even steeper dive in demand.