INHOUSE INSIDER Forum, News, and Career Center for In-House Counsels

30May/080

Gender Gap Due, in Part, to ‘Ambition Gap’?

A friend of mine, who is a woman General Counsel with a prominent company, sent me this interesting March 28, 2008 ABA article written by Martha Neil about the "Gender Gap" issue that I wanted to share with you.

Although Hillary Clinton is, perhaps, a rare exception, there is a reason why women are underrepresented in lawyer-laden political circles.

It's because they don't fight as hard as men do for political office, writes Ruth Marcus in a Washington Post column.

"There is a substantial gender gap in political ambition; men tend to have it, and women don't," says a recent Brookings Institution report (PDF) that Marcus cites.

Disproportionate family responsibilities and a "cockiness gap," as Marcus describes it (men tend to have more confidence), also play a significant role in this discrepancy, the report found.

Does what Marcus terms an "ambition gap" between men and women in the political arena also help explain the disproportionately small number of female partners at law firms?

Women have no problem getting a foot in the door and working successfully at law firms initially for several years. But then they do not rise through the ranks to partner in the same numbers as their male counterparts. This is documented, for instance, in a recent study by a University of Iowa sociologist, although she is not the only one to have noted the phenomenon. Meanwhile, the reasons for discrepancy remain somewhat elusive.

"What we don't know is whether the women intentionally steered themselves off the path to partnership, or whether someone blocked the road and pushed them off," says sociologist Mary Noonan in a U of I press release about her study.

Virtually all of the women reported that they had experienced gender-based discrimination from other lawyers or clients, according to Noonan.

Writes Marcus: "Sometimes the hardest glass ceilings are the ones women impose, whether knowingly or unconsciously, on ourselves."

Here are my thoughts on this:

Family responsibilities still fall disproportionately on women, and certainly a number of women are not interested in becoming law firm partners or general counsels for a variety of reasons. Yet, the majority or women either leave or are not being promoted, not for lack of want or ambition.

There is evidence of class ceiling issues and quality of life issues that are still keeping a great number of women from achieving their full potential and filling these top positions.

Accounting firms have tapped into this issue, and their results have been astonishing. In 1993, before Deloitte & Touche initiated its "Women's Initiative," a mammoth program aimed at addressing various glass ceiling and quality of life issues for women - only 7% of partners were women.

Since the "Women's Initiative" was first launched in 1994 - 19.2% of partners are women, and growing. That's triple what it was nearly fifteen years ago. Despite this success, Deloitte acknowledges that they still have a ways to go.

Obviously, Deloitte & Touche seems to think that even more women are ready, willing, and able to move to these high level positions. This seems to suggest that want and ambition alone is not all that is necessary for women to accede to these top positions.

Since accounting firms and law firms operate under a very similar model, perhaps some of their successful strategies could be applicable to law firms as well. There is something to be said about law firms, as well as companies in general, that are coming up short in terms of promoting more women to the top. Are they missing something?

The issue more often than not is not about women not wanting these positions, but rather about women not getting to a place where they can refuse them.

What do you think?

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29May/080

In-House Salaries: What You Need to Know Before You Start Negotiating

I am constantly involved in negotiating compensation packages on behalf of the candidates we are placing in-house with our various company clients. Some of the most sophisticated salary negotiations typically occur at the general counsel level. We often have situations where the company is very excited about the general counsel candidate, and the general counsel candidate is just as interested in joining the company. Yet, in the midst of this “love fest” the process typically slows down – and in the worst circumstances halts – because of salary negotiations.
Typically, we are confronted with companies who are making offers at the top of their range, and candidates who are looking to negotiate beyond this range. Usually, there is some back and forth exchanges and negotiations, and depending on the company and the candidate demands, we typically come to an agreement.

However, there are some instances where either one of the two parties – most often than not, the candidate – holds his/her position based on a relatively small amount ($5K-$20K), and as a result of their unwillingness to compromise, decide to reject the offer altogether. In this case, the candidate may be missing out on an outstanding opportunity for which he/she may have been absolutely perfect, and the company has lost on the time, effort, and expense it had invested in the process.

Although this remains the exception to the rule, it has become a more predominant trend in recent years. The perception of what is “market” and what can or cannot be negotiated has become unrealistically skewed, especially by associates at large firms. Most associates who are confronted with in-house salary figures gripe, “It’s not market.” It’s easy to understand why. The salary wars waged by large law firms around the country increasing first-year associate salaries to $145,000 and $160,000, as well as incremental increases of other classes by as much as $15,000 have done little to provide law firm attorneys with a realistic understanding of their worth in the corporate legal market.

They forget one crucial distinction between the law firm and in-house environment. While associates and partners are an integral part of the law firm’s “profit centers” and help generate millions of dollars in revenues on behalf of the firm, when they transition in-house, they become “part of the overhead.” In-house counsels, with very few exceptions in the licensing area, do not generate revenues. At best, they protect a company from liability. Unlike a law firm that sees the hiring of associates and partners as a means to increase productivity and revenues, companies must determine whether hiring an attorney in-house is cost effective, in both the short and long run. The value proposition changes drastically, and therefore, so does the compensation.

While in-house salaries have traditionally been more negotiable than law firm salaries – whether or not the firms operate under a lock-step compensation plan – there are real limits to what can be negotiated. That said, while larger companies may be able to offer more attractive packages – they typically offer little in terms of negotiations. Larger organizations have to worry about setting precedent with other employees. Smaller organizations, on the other hand, may have more flexibility, especially with respect to intangibles.

Nationally, the median base salaries for in-house attorneys with 5-10 years of experience ranges between $100,000-$150,000 per year. While deferred compensation, including bonuses, has risen dramatically, most law firm attorneys transitioning in-house can experience compensation reductions ranging between 50%-70%.

Median total cash compensation for new law-school grads in in-house legal departments is $70,000. There are also part-time, contract counsel, and those who work for non-profit and public organizations who may be earning a lot less – sometimes as little as $50,0000 per year - and some general counsel who have a base salary that does not exceeds $150,000.

The question for most associates coming out of large firms need to resolve is whether he or she is willing absorb the cost of transitioning in-house. While money should never be the main motivating factor behind accepting or rejecting an in-house position (or any positions for that matter), making sure you are being offered a fair package is an important consideration. Therefore, before you enter into salary negotiations with an in-house employer, here are some factors to consider:

Step One: What Is The Median Range For This Type of Position?

The first step in any salary analysis should be to consider whether the package being offered reflects the market. This is probably the most difficult factor to determine. Why? Because you cannot rely on law firm figures as a benchmark, and because in-house figures tend not to be as easily accessible to the general public.

In addition, when you are comparing in-house figure, you need to consider several variables, including:

1) Location
2) Industry
3) Company Size
4) Public vs. Private
5) Revenues/Profitability
6) Capitalization
7) Future Growth Plans
8) Overall Financial Status

You also need to make this comparison based on comparable positions – in other words, positions that require to the same level of experience, credentials, and levels of responsibility.

If you can, you should begin to contact lawyers you know in the industry. Obviously, contacting a legal recruiter who specializes in in-house search and placement may be your best option in gathering the information you need without having to do your own independent research. Whatever means you choose to use, you need to do your homework and obtain these figures.

Step 2: Adjust The Median Based On Company & Position Specifics.

Once you have your median salary information available, you can start to make “up” or “down” adjustment based on additional company and position factors.

1. What credentials and/or expertise does the position require?

You should remember that all positions are not created equal. Obviously, the more senior the position, the greater the level of responsibility, and the higher the credentials required (large law firm experience, top 20 law school graduate, the higher the adjustment you can expect to make.

In addition, not all specializations are created equal. Attorneys with expertise focusing on specialized practice areas – including licensing, patent, trademark litigation, mergers and acquisition, and international law - can expect to commend higher salaries.

2. What are other attorneys in the legal department earning?

This usually determines the real limits on what a company can realistically offer for any one position. Don't expect to earn more than the General Counsel - unless you are coming in at a higher level than attorneys already on staff, you should not expect to be offered a salary that greatly exceeds the range of existing salaries.

While it is not always possible or practical to get this information (e.g., what if there is only one other attorney in the department), there is nothing wrong with asking what the range is if there are a number of other legal counsel in the department.

3. What are other employees at the same level in the organization earning?

If you are coming in at the general counsel level, and/or if there are no other counsel on staff, you may want to determine what the CEO, CFO, and other members of the senior management team are making.

4. Where do the attorneys fit into the organization?

The importance given to the legal department of any organization, will be important in determining how much the organization is willing to spend and/or budget for it legal members.

In a company where attorneys are considered part of the “profit center” of the organization, such as licensing, or involved in functions necessary to the financial growth or main operations of the company (i.e. M&A, Technology, Services etc), you can expect salaries to be higher. The same can be said where the attorneys are part of the senior management team.

In a company where attorneys are viewed “part of the overhead,” at best as protecting a company from liability, or simply enacting the decisions that management has already made, you can expect salaries to be lower.

Step 3: Don’t Forget To Add The Other Benefits.

Extra incentives such as bonuses and stock options are an important element of in-house compensation packages. A realistic bonus range for most in-house position will fall between 15%-30% percent of the base. Stock options and equity vary too greatly to be given a range, but should nevertheless be given consideration when adding your total compensation numbers.

Finally, be sure to look at the benefits packages as well. Contributions to retirement plans, health insurance that is largely covered by the employer and other similar benefits can add up. Sometimes all of the “other benefits” can add up to 50% of the base salary offered.

Step 4: Determine Your Potential For Future Earnings.

Finally, you need to take into consideration what your future earnings might look like. Some companies provide various types of raises, bonuses, increased stock and other equity components over time as incentives and rewards for superior performance and longevity within a legal department. Too often, candidates are too focused on the package being offered to them now, and fail to consider how their compensation might stack up in the future.

Some companies may offer a compensation package at the top of their range that may be initially attractive, but may provide little in terms of future increases short of the typical 2%-5% yearly increase. Other companies may proposed what is perceived as a lower overall package, but may have built-in rewards and incentives that may dramatically increase overall compensation over time.

Conclusion

You need to fair, not greedy. What you are looking at an offer, you should be determining whether the compensation falls within the high range of what is considered to be reasonable. Your arguments should be based on your market research as well as the other factors listed above. You need to be emotionally detached from this process, and focus on rational argument based in fact. Remember that you are still trying to make a good impression on your potential employer. The last thing you want is to enter into the type of negotiations that will leave a bitter taste in your employer’s mouth, and make you a prime target for a layoff at the first sign of financial trouble or performance mishap.

You should also be ready to make concessions where necessary – successful negotiations are a two-way street. What else can you provide or leverage during your negotiations? Can you move up your start up date? Are you willing to cut your vacation time? Will you make your bonus contingent on hitting certain benchmarks?

Finally, despite your best efforts, there may simply not be enough money in the budget to increase your salary or compensation package offer. If this is a job you really think that is you're going to love, consider whether the company culture, the benefits, and the job itself are worth it - regardless of the compensation. Otherwise, you may walk away from an incredible opportunity and regret it for the rest of your life.

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28May/080

In-House Salaries & Compensation: Sample Surveys.

A survey report in the March 2008 issue of Inside Counsel says that, “as starting salaries for law firm associates continue to skyrocket, law departments are hard-pressed to keep up.” Inside Counsel’s 2008 Comp Report uses Hildebrandt’s Law Dept. Survey and Altman Weil’s Law Dept. Compensation Benchmarking Survey to offer a sampling of compensation at in-house legal departments.

CLOs/GCs in departments with more than 25 attorneys earned $645,000 in median total cash compensation in 2007, though there seems to be a huge variance between public and private companies and NGOs. Extra incentives such as bonuses and stock options are an important element of in-house compensation packages, according to the report, and the percentage of total cash compensation that comes from bonus is greater the higher one is in the department. Though billed as a “sampling,” there is a lot of useful information in the report, which can be accessed by clicking here.

For those interested in more information about in-house compensation, ALM Research offers the 2007 GC Compensation Survey (as well as data for the same from 1993 – 2006), which includes the 100 highest-paid General Counsels at major corporations, rank in the Fortune 500, salary, bonus, and where applicable, other forms of remuneration for each of the GCs ranked.

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27May/080

Survey Finds That Firms Improve Diversity Efforts in Response to GC Pressure

Under increasing pressure from general counsel to diversify their personnel, law firms may find encouragement from a new Altman Weil Inc. survey showing they are making some progress.
The report shows that 58 percent of participating law firms have a designated diversity manager or director, up 8 percentage points from 2007 and 13 percentage points from 2005, the first year the survey was conducted. Also, the survey found that 100 percent of participants report having a diversity committee in their firm, up from 96 percent the year before.

According to Virginia G. Essandoh, an Altman Weil senior consultant, expressed concernes that "while some all firms appear to have decided to "do something" about diversity... The lack of substantial progress begs the question: Are law firms and legal departments putting forth their very best effort in improving diversity?" Read the full article at Law.com.

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21May/080

2008 Best Legal Department: And the Winner Is …

Corporate Counsel's winner of the "2008 Best Legal Department" is a telecom company whose legal department has come a long way - from the brink of bankruptcy when morale was low and attorneys were overworked, to financial success where attorneys enjoy advancement opportunities, sophisticated work, access to new technology, flexibility, and diversity. So who is this big winner? Qwest Communications International Inc.'s under the direction of its general counsel, Richard Baer.
What I have found particularly interesting about the success of Quest's legal department, as well as that of other notable legal departments like Caterpillar's, is the dedication, down-to-earth, and hands-on approach of their general counsels. Invariably, those general counsels who take an active and consistent role in the recruitment, development, and advancement of its attorneys are those who reap the rewards of highly successful and effective legal departments.

While many claim to be doing just that, only a few are truly dedicated to the process. This is a difficult task that brings with it little glory, and invariably a lot of hard work. Some of the common traits these general counsels share are an openness to new ideas, and the willingness to try new strategies for improvements - from both internal and external sources. They tend to not only be willing to think outside the box, but to also completely reinvent the "box."

Congratulations to Richard Baer for a job well done.

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21May/080

The 2008 Best Legal Departments: The Finalists

Corporate Counsel has come up with its "2008 Best Legal Departments" survey, and the finalists are both an impressive and diverse group of companies.

In terms of methodology, the following factors were evaluated: department structure, litigation strategy, management of outside counsel, use of technology, pro bono efforts, compliance, and an open-ended essay question. The finalists included:

Caterpillar
General Motors
McDonald's

Do you agree with the results? How would you rank your own legal department?

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21May/080

This Cat Has Claws (2008 Best Legal Department Finalist)

We were thrilled to see one of our most loyal clients be recognized for its outstanding legal department; Caterpillar, as we have been telling our candidates for years is simply one of the best. Therefore, it was no surprise to see Caterpillar make the list as a "2008 Best Legal Department Finalist."

The company offers its attorneys extraordinary opportunities for advancement, including paying for a MBA degree to opportunities to work overseas as well as on the business side. It's hard to keep up with all their moves and promotions!

The result of all this? 91% percent of staff members in the legal department say they're happy with their jobs, according to a company survey. Turnover has stayed steady at around 2.3 percent, even though the legal department has doubled in size since 2002. That's nothing short of impressive!

A good portion of the credit undoubtedly goes to Jim Buda, whose dedication to his legal team is unparalleled. This is a general counsel whose self-professed legacy is to create a legal department he can be proud of. And there is plenty for him to be proud about. While he admits that the job is not yet done – he certainly merits to be congratulated for taking his legal department to where it is today.

Click here to read the full article.

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19May/080

Time to Bring Legal Work Inside?

General counsels are watching their bills from outside counsel more closely than ever. As we had discussed in our State of the Market Report “In-House Legal Hiring in 2008,” an obvious tactic in responding to growing outside counsel fees is to take more work in-house.

That's what Michael C. Ross, an adjunct consultant at Altman Weil, is suggesting in his article titled "Time to Bring Legal Work Inside?" Ross discusses various factors companies must consider when bringing more legal work in-house.

These factors include conducting a thorough analysis of outside billings, selecting practice areas that may be moved in-house, determining the capacity of in-house attorneys to handle the work, calculating the cost of adding in-house counsels, and managing expectations about savings from bringing additional work inside the company. To read the article in its entirety, click here.

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12May/080

How to Manage Your Litigation Costs (Part I)

For most law departments, reducing outside counsel fees boils down to reducing litigation fees. Studies show that litigation fees typically account for around three-quarters of what law departments spend on law firms.

According to an article published by Stewart M. Weltman in Corporate Counsel, there is only one sure way to lower litigation costs: to keep it small, lean, and managed proactively.

In the beginning of a three-part series on the subject, Weltman claims that it is not enough to set flat fees or create litigation budgets. In-house counsels, he says, must learn how to proactively manage their outside counsel -- in the trenches so to speak. To see the entire article, click here.
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5May/080

Law Firm GCs Earning More.

General counsel at top law firms have seen a significant pay hike over the last year, according to a new survey directed at Am Law 200 firms.

The 2008 survey by Altman Weil, a legal consulting company, found that the average full-time general counsel at these law firms earned more than $750,000 in 2007. That number is up 34 percent from 2006, when the survey found that they earned about $561,000. (Corporate Counsel found the 2006 average salary for all GCs to be $557,360.)

Those lawyers who worked in the law firm GC role part-time saw a 9 percent increase from 2006, raising their compensation to about $665,000 a year. The survey, released April 29, reports that 85 percent of responding firms have a designated general counsel, the same percentage as in 2006. Of these general counsel, 82 percent are partners, and 83 percent have a litigation background.

Ward Bower, principal at Altman Weil and architect of the survey, says the general counsel's litigation background makes sense because the job is "essentially a risk management position."

Bower also pointed to the dramatic drop in the percentage of general counsel on law firms' governing committees. In 2004, that number was 40 percent; it is now 22 percent.

"Perhaps this change occurred so general counsel can better maintain client privilege for the issues that they deal with," he says.

Altman Weil solicited 195 law firms to participate, and 86 responded.

First reported in The Legal Times.

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