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

30Jan/090

10 Job Search Tips for Downsized In-House Attorneys

Deborah M. House, Vice President and Deputy General Counsel of the Association of Corporate Counsel, offers her top 10 job hunting tips for in-house attorneys.

She suggests: proofreading your resume, tailoring your resume to the position, knowing the company you are interviewing with, practicing your interview skills, make sure you ask questions, keeping the discussion balanced, keeping a professional demeanor, and networking.

In short Ms. House focuses her tips of having a professional resume (see professional resume writing services), and on doing the necessary preparation for your interview. To read the entire article, click here.

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29Jan/090

Merrill Slashes Senior Legal Jobs, Including the General Counsel

Senior legal roles at Merrill Lynch have been axed as part of the investment bank's global restructuring, including the investment bank's vice chairman and general counsel Rosemary Berkery, and general counsel of litigation and employment Barry Mandel.

New York associate general counsel Carlos Morales, co-head of global litigation John Eisenberg, and director and senior counsel Chris Haas remain with the bank's the legal department.

The move comes after Bank of America's $50bn acquisition of Merrill Lynch last September (22 September ).

A Bank of America spokesperson said: "Bank of America expects to eliminate 30,000 to 35,000 positions over the next three years, reflecting the merger with Merrill Lynch and the weak economic environment, which is affecting the level of business activity. The reductions are coming from both companies and affect all lines of business and staff units."

It is thought the majority of the combined bank's cuts will be made in New York with the capital markets headcount expected to be reduced by approximately 30-40 per cent.

[Source: The Lawyer, by Julia Berris, published Jan. 27, 2009; Corrected on Jan. 31, 2009]

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28Jan/090

The Future of Wyeth’s In-House Legal Department in Pfizer Merger

The Pfizer/Wyeth proposed deal could be bringing a glimmer of hope to law firms and investment banks that have seen mergers and acquisitions activity on the decline since 2007.

But one lawyer's hope may be another's misery. What's to become of Wyeth's 300+ legal department?

According to an article by The Legal Intelligencer, Pfizer Inc. has made no secret of its intentions to slash thousands of jobs once a planned merger with pharmaceutical competitor Wyeth goes through.

How Wyeth's 300-person worldwide legal department will be affected is still a question mark.

A source, offered by The Legal Intelligencer, familiar with the $68 billion deal said it was too early to tell how the internal law departments will be affected by the acquisition, though he expected to see some impact. Prior to the proposed merger, Pfizer had already made some significant cuts to its legal department.

"The good thing," the source said, is that for a merger of this size, there is "remarkably little overlap." Wyeth, for example, has vaccine and biopharmaceutical departments that Pfizer doesn't have. It also still has a consumer health care division. Pfizer sold off a similar division in its company not too long ago. All three of those Wyeth divisions have attorneys dedicated to them, the source said.

One can hope that current Pfizer CEO, Jeff Kindler, a 53-year-old Harvard Law School graduate and former legal clerk to U.S. Supreme Court Justice William J. Brennan Jr., will look kindly to Wyeth's legal department. However, in light of the recent history of mergers and the fate of in-house legal department, the future of Wyeth's legal staff is precarious.

Mergers typically result in legal departments layoffs. Here are a few examples of big company mergers and ensuing legal departments layoffs:

  • Akzo Nobel - International Chemicals: resulted in a 25% reduction in legal staff (Dec. 2008)
  • Linde-BOC: reduced lawyer count by 40% (August 4, 2008)
  • BellSouth - AT&T: resulted in a 30% reduction in legal staff (May 5, 2008)
  • Nextel-Sprint: resulted in a 30% reduction in legal staff (Sept.13, 2005)
  • Oracle - PeopleSoft: resulted in a near 100% reduction of its lawyers (Dec 13, 2004)
  • El Paso - Coastal: resulted in a 30% reduction in legal staff (January 29, 2001
  • Honeywell - Allied Signal Inc.: reduced lawyer count by 50% (December 1, 1999)

If you do the math, as a member of the legal department's merged company, you have a 30-50% chance of losing your job post-merger.

Some of the post-merger consolidation issues faced by legal departments include duplication of positions, attorney attrition from those unwilling to stay or relocate, replacement of top legal positions by new management, the sale of business units supported by attorneys etc.

In the majority of case, layoffs and a reduction on staff will ensue in the short-term. However, over time, law departments tend to maintain about the same number of lawyers per unit of revenue. How well the newly merged company is doing financially-speaking will have a significant impact of the size of its legal department.

This may be a small consolation to members of the Wyeth legal team facing cuts. We can only hope for the best.

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26Jan/090

Big Layoffs Announced: 6 Immediate Steps You Can Take Following a Layoff

Some of the biggest U.S. companies have been announcing large layoffs in the last few days including:
  • Caterpillar (20,000)
  • Pfizer (8,000)
  • Sprint Nextel (8,000)
  • Home Depot (7,000)
  • General Motors (2,000)
  • Microsoft/Intel (10,000)

Have we hit bottom yet? According to the experts, there are many more job losses coming in the year ahead. The latest outlook from forecasters in a survey released Monday by the National Association for Business Economics showed:

  • 39% predicted job reductions through attrition or “significant” layoffs over the next six months (up from 32%t in the previous survey in October).
  • 45% predicted no change in hiring plans
  • 17% predicted that hiring would increase.

What to do if you have been laid layoff?

In this time of doom and gloom, it's easy to wonder what to do next if you are the victim of an economic layoff. Here are 6 immediate steps you can take following a layoff:

  • Take time out to absorb what's happened. Of all the things that can have a major impact on your life (family, health, love) your job is right up there. Losing your job can be a dramatic impact - emotional, financial, and sometimes physical. It's okay to take some time to absorb the blow, and to indulge in the range of emotions that the loss will elicit. That said, don't take too long to mourn, take a week maximum, and then get up and start again.
  • Get everything you need from your former company to move on. Make sure you have something in writing about your layoff; this will save you time and money when filing for unemployment. Take all of your contacts with you; you will need them to conduct your job search. Be sure to obtain your last paycheck and ask for COBRA information, even if it is expensive, it might be your best option until your next job. Finally, talk to your supervisors about obtaining a letter of recommendation, about providing you with references, and contacts to help in your next job search.
  • Get back on the horse and let people know. No one likes talking about losing his/her job, but this is a time where you need to reach out to others around you. You need to get the word out that you are looking for work, and don't underestimate anyone's ability to help you out. Perhaps the person you are speaking to knows of someone, who might know someone else etc. This is a time to grow your network and to meet and get introduced to as many people as you can.
  • Get your finances in order. While everything else may have slowed down, the bills will continue to drop regularly. The first thing you need to do is to file for unemployment benefits, ask your company for severance (the worst that can happen is a "no"), and make sure you're paid for any time off you're entitled to, such as accrued vacation or sick days. Next, develop a budget and cut down on all non-essentials, and look for something part-time or temporary to help you stay active and keep you away from chipping away at your savings. Your job search in this market may be a long one - 6 to 12 months depending on your level, industry and geographical area, so you need to be prepared for the long run.
  • Update your resume, consider professional writers. You need to create the type of resume and cover letter that convince the most selective employers that you're the right candidate for the job. In today's competitive legal job market, a well-written resume may be the single most important factor in getting your foot in the door and on your way to landing the perfect position. Employers may be looking at identical candidates - with similar skills and credentials - and the resume is usually what tilts the balance one way or the other. Consider turning to professional resume writers to assist you in crafting the right resume to get an edge on the competition.
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22Jan/090

2009 Predictions for In-House Legal Departments (Update)

In this fast moving economic environment, the pulse of the in-house legal market is changing faster than you can say “recession.” Hence, we wanted to provide you with an update to our original 2009 predictions.
How Much Hiring Will Occur in 2009?

This in-house legal market has always been competitive, but this is possibly the worst legal market we have seen in the past decade. We are revising earlier figures, and predict that fewer companies will be hiring for their corporate legal departments than originally predicted.

How few? We predict that about 15% of companies will be hiring – very selectively in 2009.

What might this look like over the course of the year?

  • Quarter 1> 0-5%
  • Quarter 2> 5-7%
  • Quarter 3> 7-10%
  • Quarter 4> 10-15+%

Companies this quarter (Q1) are currently laying off employees including legal staff, rather than hiring. Some replacement positions will become available, a small number of companies will hire to balance their legal departments, and some companies will look to hire their first in-house counsel. That said, unless we see a determinative change in the economy, we will see one of the lowest numbers of in-house attorneys positions available in the last decade.

Who Will Be Hiring in 2009?

Companies who will be hiring at a greater rate than others will most likely be in the following industry sectors:

  • Health care
  • Education
  • Government
  • Energy (alternative)

We can also expect smaller companies to take advantage of the market and hire their first in-house counsels. We have not yet seen an uptick in litigation, employment, or regulations to boost the number of hires significantly.

What Will Salaries Look Like?

In-house attorney compensation always depends on several factors, including:

  • Industry
  • Geography
  • Size of the Company
  • Size of the Legal Department
  • Position Level/Responsibilities
  • Position Requirements
  • Company Finances
  • Economic Market

What can we predict for 2009? Salary freezes for current staff, no bonuses, and a reduction in base pay for new hires. We predict base salary decreases between 15-25% depending on market sectors for 2009.

Large Company In-House Lawyers (2009): Average of $206,000 in pay and bonuses.
Large Company In-House Lawyers (2008): Average of $236,000 in pay and bonuses.
Large Company In-House Lawyers (2007): Average of $226,000 in pay and bonuses.

What are your predictions for 2009? Share your thoughts with us.

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20Jan/090

Corporate Legal Department Layoffs: The Market in 2009 (January)

The unemployment rate rose from 6.8 in November 2008 to 7.2 percent in December 2008. In light of the mid-January numbers, it looks like we will see yet another dip in unemployment figures.

The legal services industry lost around 7,000 jobs in the year ending in December, according to new statistics from the U.S. Department of Labor.

The numbers were part of a report showing 2.6 million jobs were lost in the country last year, the largest job losses in six decades according to the Am Law Daily reports.

The growing army of the unemployed, at 11.1 million, is nearly 50 percent bigger than at the start of the recession a year ago.

The Am Law Daily did see a “silver lining" by a legal job an increase of about 1,300 in December, according to seasonally adjusted data. Not much of a "silver lining” when considering the continuing downturn and layoffs at law firms and corporate legal departments.

All eyes will be on Barack Obama today as he is sworn in as the 44th President of the United Stated. Obama will be putting pressure on Congress to enact an economic stimulus plan quickly. However, this may be a small bandage of an increasingly bloody wound.

While there is some hope that the Obama administration and its legislative priorities will provide a boost in practice areas related to health care law, employment, and regulations, it may not be enough to offset the continuing rise of unemployment rates amongst lawyers.

Have you been part of a corporate legal department layoff? Please share your stories, an help us keep an accurate tally.


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15Jan/094

Alternatives to Slash & Burn Layoffs: Keeping Your Hard Earned Talent

Layoffs are short-term fixes intended to save a company money. Companies feeling the financial squeeze want action and quick results. Layoffs offer a fast solution with immediate bottom-line results. But could they ultimately work against a company’s best interest by costing more in the long run?
This is a classic layoff problem. Layoffs provide companies with instant, but short-lived relief. Layoffs increase pressures on remaining employees that affect productivity, create an atmosphere of uncertainty and low morale leading to more defections than intended, and leave companies vulnerable and ill equipped to take full advantage of opportunities when the economy picks up again.

Hiring talented employees, including lawyers, is a very expensive proposition for companies and law firms alike. The cost of recruiting and/or replacing an employee making over $100,000 per year typically costs companies more than $60,000. Law firms typically spend an average of $75,000 to recruit a single summer associate — which includes hiring costs, overhead, salary, entertainment, and training. The cost of replacing an experienced mid-level associate jumps dramatically to $200,000 - $500,000.

Smart companies don’t want to lose the people they have worked so hard to recruit and train. Not to mention the expense. So, what are some the alternatives?

Compensation Cuts Across the Board. This is a “We Are In It Together" approach that Caterpillar has decided to take this past December. What is particularly important about the cuts at CAT is that they are even bigger for executives. According to Caterpillar's arrangement, for 2009, executive compensation will decrease up to 50%, compensation for senior managers will be reduced 5% to 35% and other management and support staff will see a reduction of 0% to 15%. CAT is not alone in this process, other companies have followed suit. In December, FedEx Corp. also slashed the pay of more than 35,000 employees, including a 20% base pay cut for its chairman and chief executive, Frederick W. Smith.

Reduced Hours & Unpaid Holidays. According to the New York Times, a growing number of employers, hoping to avoid or limit layoffs, are introducing four-day workweeks, unpaid vacations, and flexible work schedules. In November of this year, Dell Inc. offered nearly all of its employees up to a week of unpaid leave as part of an effort to cut costs in the last quarter of 2008. Although Dell reduced its global workforce by 10 percent over the last year, it hoped to save the company further layoffs by offering this voluntary leave program. The New York Times also reported that Cisco offered a four-day year-end shutdown, Nevada casinos implemented a four-day workweek, and Honda offered voluntary unpaid vacation time.

“Sabbaticals” and Other “Flex Plans.” During the last downturn of 2001, Accenture announced a voluntary sabbatical program known as "Flexleave." Offered to about 1,400 consultants mostly in the United States, the program gave them 20% of their salaries and continues benefits over a six- to 12-month period. Stock options remained in place for those who took the offer. The only caveat: while employees could take another job during their leave, they could not work for a competitor.

There are a number of other alternatives, more or less palatable for employees but less noxious than layoffs, such as: hiring freezes, voluntary severance packages, offering early retirement to those close to the retirement age, reducing travel expenditures, delaying capital projects, and eliminating non-staff positions filled by temporary workers and independent contractors.

Bottom Line: Human capital is the most important element of any company’s success, and when that capital is being reduced, it ends up being a more costly proposition than its short-term savings.

What is your company doing to avoid layoffs? What alternatives would you propose?

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13Jan/090

Do We Have Too Many Lawyers?

Being a lawyer no longer means being able to pay the bills.

I was concerned to read that law firms were trying to hold pay below the going rate of $35 an hour for contract attorneys in Washington, D.C., and New York, according to the National Law Journal.

Should law firms look to reduce their billable hours? Sure. But at the expense of already underpaid, struggling contract attorneys with no health benefits? Unfortunately, majority of law firms decided on a "yes."

Working as a contract attorney is not what most law students aspired to when they entered law school. In general, contract or temporary attorneys hired to assist law firms or companies with specific jobs are simply looking to pay the bills, stop a gap on their resumes, get some experience when fresh out of law school, or round off their retirement earnings.

For most of these lawyers, this is not a chosen career path. The majority of law firms and companies who hire these attorneys on a contractual or temporary basis to handle document review, very rarely consider them for permanent positions. They are, with few exceptions, generally treated like cheap commodities, and getting increasingly devalued in this economy as supply continues to exceed demand.

What primarily lead firms and companies to reduce the value of the work produced by contract attorneys to $20-$35 per hour? Supply and demand.

On the demand side, since 1988 the legal sector has grown at an average annual inflation-adjusted rate of 1.2%, less than half as fast as the broader economy, according to Commerce Department data.

Some of the reasons for this reduction in demand includes the decline of some practice areas in recent years (limits on class-action suits), the increasing pressures on law firms to reduce their rates, and the growing use of legal offshoring for high-volume work. These are all reasonable, explanations, but could there be something else at play?

Could part of the problem simply be that there are just too many lawyers?

According to the American Bar Association, there are roughly a million active attorneys in the United States (ABA Source: 1,143,358 resident and active attorneys in the United States in 2007). A million is a big number, one that the market is telling us is too large for present demand. As a result, the majority of law-school graduates are suffering from a supply-and-demand imbalance that's suppressing pay and job growth.

On the supply side, law schools may be partly to blame for the influx of lawyers entering the work force. Since 1995, the number of ABA-accredited schools increased by 11% to 196. In 2008, as many as 10 new law schools were in the works, with the majority of them proposed in the eastern part of the country, according to the National Law Journal. The new law schools come at a time when applications nationwide are declining. They also come at a time when demand for legal services is declining.

So why the increase in law schools? Certainly it’s not in response to the 1.2% growth in the legal sector. The answer is money. Law schools are a very lucrative business. Since 1985, average law school tuition has more than tripled. A year of tuition at a public law school is now over $20,000 a year, and average tuition at private law schools is around $30,000 a year. Law schools may not be alone in sharing the blame.

The lack of knowledge about the industry and job prospects for law school graduates by prospective applicants is part of the problem.

While the preliminary figures for fall 2008 showed a 1.0% decline in the number of applicants, the number of applications increased by 2.7%, according to the National Law Journal. The figures indicate that while fewer people are applying to law school, they are submitting more applications. Why? The majority of law school applicants are still lured by the appeal of $100K+ salaries.

Big law firms – known as the AmLaw 100 – dazzle by offering attractive starting salaries ranging from $145,000 to as high as $160,000. About 50% of law-school graduates make less than $60,000 a year, 27% make between $40,000 and $55,000, and 23% make $100,000 or more, according to the National Law Journal.

What are your prospects of making $145,000 to $160,000 a year? Very slim of you are not a graduate from a top 50 law school. Of the 1M+ attorneys practicing in the U.S., only about 43,000, or 6% of US lawyers work at AmLaw 50 according to the ABA. The rest of the AmLaw 250 is comprised of 70,000, or 9% of U.S. lawyers. That leaves nearly 91% of all practicing lawyers out of that coveted golden circle.

For the majority of law school graduates in second, third, and fourth tiered schools - even those who graduated at the top of their class - the positions they find often do not enable them to pay off their loans and make a living. Nationwide, law school debt in 2007 averaged $87,906 for private law school graduates and $57,170 for public law school graduates, according to the ABA. Loan payments often exceed $1,100 a month.

And those who are working are the lucky ones.

Overall, the legal services sector has lost 9,700 jobs since a year ago and 4,200 in the last six months, according to the Labor Department. The statistics are seasonally adjusted. When not adjusted, the department reports 7,500 jobs cut during the last 12 months. While there are no specific unemployment numbers for attorneys available, one can assume from the recent 7.2% national unemployment figures that those numbers are also high.

Does the fact that we have too many lawyers impact the value of those already in the marketplace? The answer is a resounding yes.

While the imbalance between demand and supply continues, contract and temporary lawyers, will continue to see a devaluation in their rates. While a change in demand may be more difficult to modify, there are solutions that can be taken to curb supply. First, we need to demystify the earning prospect of law school graduates, and better educate prospective applicants. Second, the ABA should reconsider its accreditation policies for new law schools. Until the imbalance is rectified, contract and temporary attorneys will unfortunately continue to suffer the consequences.

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8Jan/090

Salary Slump – The Economic Crisis Has Corporate America Tightening Its Belt

InsideCounsel consulted with a range of legal recruiters and consultants to gauge the in-house compensation climate and explore the issues most impacting paychecks today. Selected compensation results from consultancy Hildebrandt International’s 2008 Law Department Survey accompany the story. More than 220 companies participated in the survey, with the median responding company reporting $9 billion in revenues, a 30-lawyer legal department, 18,605 employees and $28.4 million in total legal spending. Fifty-four percent are in the Fortune 500.

Hildebrandt’s data predates the worst days of the credit crisis—respondents provided base salary data as of mid-March 2008, and data on incentives applied to compensation earned in 2007 (even if it paid in 2008).

Yet even before the crisis had seized the economy, Hildebrandt’s data suggests legal departments may have adjusted compensation at early inklings that the financial markets were not right. While total cash compensation continued to increase, it was at a slightly decreased rate (8 percent) from last year (10 percent).

Whether such slowdowns are simply the result of year-to-year survey respondent intricacies or the first rumblings of a macroeconomic catastrophe, it’s clear that in the coming year budget concerns, coupled with other considerations, will force legal departments to rethink the compensation status quo.

Cutting Costs

As the economy goes south, corporate America has, to put it mildly, hit a rough patch. Reports of more layoffs across the corporate landscape appear in the news almost daily, and companies that have not resorted to layoffs still face ever-tightening budgets. In-house legal departments are not immune to the slump—and by many accounts, neither is lawyer compensation.

"We can certainly expect the pay schedules and the pay levels to remain rather flat," says Vanessa Vidal, president of ESQ Recruiting. "In terms of in-house salaries, I predict a downward shift and certainly a freeze with current salaries."

Hildebrandt’s survey data shows that since 2004, the median change in total cash compensation has been fairly steady among all in-house attorneys, only slightly drooping in the 2008 survey. Hildebrandt Vice President Jonathan Bellis is hesitant to interpret any declines in growth as early reaction to the economic crisis that came to a head in recent months. Rather, he sees these pre-recession survey results as part of a broader movement toward cost controls.

"We’ve seen growing sophistication on the part of general counsel and law department managers, and pressure to manage and control costs," says Bellis, who is chair of Hildebrandt’s Law Department Consulting Practice.

One much-discussed law department strategy has been to eliminate as much outside spending as possible by handling more work in-house.

"On the in-house side, corporations are actively looking for ways to manage workflow internally," says Charles Volkert, executive director of Robert Half Legal. "They are looking for candidates with in-house, intellectual property and corporate compliance/governance backgrounds, and they certainly are looking to pay those candidates the appropriate salary."

But traditionally, the legal department lacks competitive salaries because management tends to see the department as a black hole of expenses. Although Vidal says departments are putting more value in their in-house attorneys and looking for counsel with broader experience to get more bang for their buck, corporate cutbacks mean that it will be hard for companies to translate such sentiment into increased compensation in the near future.

"I don’t expect that there will be tremendous raises or salary wars of that nature," she says. "If anything, companies are going to be able to hire outstanding attorneys without having to engage in a lot of salary augmentation."
Coveted Credentials

Lawyers in a few key practice areas are often treasured in corporate legal departments. While in-house departments almost always seek out good generalists, experts cite litigation and intellectual property as traditionally in-demand practice areas—so it should come as little surprise that Hildebrandt shows in-house lawyers with IP litigation backgrounds as pulling in the highest compensation.

Meanwhile, litigation specialists have become even more valuable as companies scramble to keep up with e-discovery, and regulatory and compliance lawyers have been essential since Sarbanes-Oxley passed in 2002.

Emerging industries have also created a demand for special experience. "Hedge fund regulation, biotechnology, nanotechnology—things that are very cutting edge that you don’t see a lot of," says Robert Major, founding partner of legal search firm Major, Lindsey & Africa. "Facebook asked me to look for somebody with social networking experience—that’s a new practice area."

And when a company needs a certain background, it may be willing to pay for it. "We certainly have seen increasing salaries in the hot practice areas," says Charles Volkert, executive director of Robert Half Legal. "Candidates with those skill sets ... can command higher salaries in the marketplace."

However, with lawyer compensation increases expected to hit a major speed bump in the faltering economy, some say companies will seek out broader experience. "[Companies hiring additional counsel] are going to be focusing on generalists, with a combination of regulatory, corporate experience, some litigation, some IP experience, trying to get the most value out of their hires," says Vanessa Vidal, president of ESQ Recruiting.

Salaries won’t necessarily reflect this increased value, however. Even among the most coveted lawyers, Vidal predicts compensation packages will remain flat due to the growing pool of talented candidates.

Deal Sweeteners

Hildebrandt’s survey shows cash bonuses continuing their mostly steady increase of recent years, and across all attorney levels, actual bonuses met or well exceeded their target amounts. Of course, those numbers do not yet represent life under the current recession.

In times of prosperity, huge bonuses symbolized corporate success and excess, but in the current economy they have become a harbinger of shaky performance and general Wall Street woes. Ninety-two percent of Hildebrandt respondents say attorney bonuses are tied to the overall financial performance of the company.

"Since we know that bonuses are derived primarily from company performance, they will certainly be the hardest hit," says Vanessa Vidal, president of ESQ Recruiting. "And I think in terms of the overall compensation scheme, this is where the attorneys are first going to feel the pinch."

As a result, incentives such as stock options and bonuses are becoming less attractive. But recruiting top talent went beyond cash even before economic issues arose.

"I would say that corporations and law firms that are attracting and retaining top talent are not just focused on salaries and bonuses, but they’re also looking for other key components that are driving forces right now with candidates accepting jobs and looking for new opportunities," says Charles Volkert, executive director of Robert Half Legal, citing carrots from close mentoring to flexible hours to gym memberships.

CLOs and GCs, who according to Hildebrandt derive the greatest percentage of their total cash compensation from traditional cash bonuses and the greatest percentage of total compensation from long-term incentives, will most acutely feel the change.

Such declines should come as no surprise to anyone remotely in tune with their company’s financial performance. Major, Lindsey & Africa founding partner Robert Major cites a lawyer from a "name-brand Silicon Valley company" who saw her bonus shoot up from $45,000 three years ago to $345,000 last year. "The candidate has acknowledged that there’s no way her bonus is going to be anywhere near that this year," he says.
Cashing Out

In-house counsel have long griped about sky-rocketing associate salaries at top law firms. The bloated paychecks not only nudge up outside spending but make cynics wonder why—when an entry-level associate can make nearly as much as an in-house attorney with a decade of experience—anyone would choose to go corporate.

In 2008, a first-year associate at a law firm with more than 75 attorneys, on average, had a salary between $111,750 and $137,000, according to Robert Half Legal’s 2009 Salary Guide. The Big Law standard starting salary remained around $160,000.

In comparison, Hildebrandt’s legal department survey shows a 2007 law school graduate pulling in $91,795. Even a more experienced in-house lawyer falls short of his or her law firm counterpart: A 1998 law school graduate made an average of $151,815 in-house, while a law firm attorney with 10 to 12 years experience made between $167,500 and $234,000.

Although experts say law firms will continue to pay significantly more than corporate legal departments, many believe starting associate salaries have reached the ceiling—and the current economy has sealed the deal.

"Large law firms have pretty substantially increased salaries, particularly in the past seven years," says Stephen Seckler, managing director of BCG Search. "Corporations have had to bump up salaries to compete for talent, but they’re not growing at the same rate as law firm salaries—up until we hit this brick wall that we’re at right now."

Still, corporations continue to feel the influence of law firms on compensation. The recent spate of law firm layoffs and dissolutions—as well as in-house layoffs—has left scores of attorneys unemployed, which could depress compensation in-house as well as at firms.

"Compensation packages are going to be quite flat, simply because they’re going to have so many candidates to choose from," says Vanessa Vidal, president of ESQ Recruiting. "It’s going to be very much an employers’ market. I think companies won’t necessarily have to stretch the way they had in the past to make themselves attractive."

Robert Major, co-founding partner of Major, Lindsey & Africa, says corporations aren’t hesitating to use this leverage. During a recent search for an in-house lawyer, he says, the company offered a relatively low salary for the experience level it wanted.

"The company said, ‘Don’t they understand there’s a recession? Don’t they understand that they’re lucky to have any job?’" he says. "[Candidates’] bargaining power has been eviscerated by the headlines of the Wall Street Journal."

Big-Pay Backlash

In October, as troubled insurance giant American International Group Inc. quickly blew through an $85 billion government loan, focus turned to its former CEO Martin Sullivan, who—following two quarters of record losses—reportedly walked away from the company in June with a $15 million severance package, $28 million in long-term incentives and a $4 million bonus.

The anger on Capitol Hill and among the public was loud enough that AIG backtracked, saying in October that it would freeze $19 million in payments to Sullivan while New York Attorney General Andrew Cuomo investigated the company’s executive compensation practices. In late November, the company announced its top executives would receive no bonuses this year and that many more executives would not see pay raises in 2009—a gesture that appeared empty days later when newspapers reported AIG managers would receive not bonuses but "cash awards," including at least one totaling $3 million.

In these times of skyrocketing unemployment rates, widespread layoffs and 12-figure government bailouts for corporations, it should come as no surprise that the public, with good reason, has focused squarely on the excesses of the upper echelon of corporate America. While CEO pay has been the bull’s-eye, it remains to be seen how an executive compensation backlash could affect general counsel of large companies.

"Everyone in the United States is very, very focused on the pay of the top group, and that pay is being cut back in ways that are very visible and some ways that are not so visible—and usually the CLO or GC makes it into the top 10 executives," says Michael Melbinger, chair of the employee benefits and executive compensation practice at Winston & Strawn. Combined with budget cuts and a surplus of lawyer talent, he says, "All in all that amounts to significant downward pressure [on compensation at the highest levels]."

Major, Lindsey & Africa founding partner Robert Major says this may be true for the top of the top GC earners, but generally the "gaudy" numbers top CEOs pull in act as lightning rods away from GC compensation. And GC compensation, he says, rarely measures up to much-publicized CEO salaries, or even the pay of the highest-profile GCs at the country’s largest corporations. According to October 2008 SEC filings, Disney GC Alan Braverman’s base salary alone will total $1.1 million in the coming year.

"In the world of general counsel I work in, those compensation numbers are just fantastic," Major says.

But even in smaller companies, heightened scrutiny of executive compensation could complicate the GC’s already tricky task of keeping an eye on compensation agreements. Although favorable executive compensation packages could clearly benefit the GC him- or herself, Melbinger points out that "in these days of everyone understanding how to search documents on EDGAR ... the GC really has to take off the personal hat for a moment and say, ‘I can negotiate this language pretty favorably to myself; however, I’m going to have to live with not being able to enforce a noncompete or a clawback on the next 20 people I hire. And that’s going to make my life miserable.’"

To see more legal department compensation statistics, click here, and to download a PDF of this story with graphs included, click here.

[By Melissa Maleske and Christopher Danzig. Published in the 1/1/2009 Issue of Inside Counsel. Reprinted with Inside Counsel's permission.]


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6Jan/092

The 2009 Legal Job Market in China

Most of us have been reading the 2009 U.S. legal market predictions, and the outlook has been rather gloomy. We all know about the financial meltdown that’s brought us here, but what about the rest of the world? How is China’s legal market predicted to fare in 2009?

Well, if misery loves company, we may have found an ally in China.

Over the last few years, China’s legal was booming. International law firms we scrambling to stake a claim in the new promised land, opening offices, recruiting legal professionals, engaging in recruiting warfare, and trying to stay on top of a booming economy. As recently as August 2008, during the last Olympiads, we took a look at this bustling legal market, and discussed the opportunities for in-house counsels (See previous post: China's Growing In-House Market).

What was a boom is no more… at least for now.

China's booming economy, which was a bright spot amid global gloom, has been slowly weakening. Outward signs of trouble began in late November, when the economy began to contract, and hundreds of laid-off workers seeking back-pay went on a rampage, trashing police vehicles, and smashing the windows of their former factory in Dongguan. Over the last few weeks, the word has seen images of workers demonstrating, of unrest, and growing tension.

Most economists believe that to keep the Chinese economy going, China must maintain an annual growth rate of at least 8 percent. In 2008, China reached 11.9 percent, but according to the World Bank, China's economy is predicted to grow by just 7.5 percent in 2009.

Today, China has woken up to a new reality, one that economists say could make 2009 the most challenging period China has faced in years: declining exports, slower growth, rising unemployment, and the potential for social unrest across the country. The trickle down effect of this economic slump has seeped through China’s legal market. China has seen its first legal job casualties amongst legal professionals in real estate and capital markets.

International law firms that had been recruiting hand-over-fist over the last few years found themselves with a large workforce and a considerably slower work flow. Taking a cue from their U.S. home offices, they began to shed attorneys and legal staff, while looking for partners with strong books of business willing to make a jump during these uncertain economic times.

Is the recruiting war in China over?

As with every economic cycle, there are both ups and downs. While we can expect the type of aggressive recruiting we had seen over the last few years slow down in 2009, some legal employers – including firms and in-house legal departments – may be looking to take advantage of this new economic landscape. Law firms will focus on the recruitment of partners with books of business, to join their ranks. While partners may have been more difficult to woe during the economic boom, with some firms experiencing signs of trouble, some of these rainmakers may be more apt to look at firms offering more stable environments.

Also, while some practice areas may be slowing down, others may be picking up. As in the U.S., practice areas that could be busy in China in the coming year are expected to include employment, litigation, and bankruptcy. Law firms may look to refocus their recruiting on attorneys in these practice areas.

In-house legal departments in China may also see this downturn as an opportunity to upgrade their legal staff. Whereas competition for legal talent was tipped in favor of law firms with deep pockets and an insatiable appetite, companies may now have an opportunity to recruit top legal talent within their budget. As we have seen in the U.S., companies in China may also look for cost cutting measures, including the reduction of outside counsel fees, and turn to in-house counsels to handle more of its legal work.

What about salaries in 2009?

In light of a weakening economy and a generally slower recruiting market, it is very unlikely to expect legal salaries in China to rise in 2009. Performance-based compensation will be the most at risk in the coming year. As a result, attorneys making a move in 2009 will be more focused on base pay when evaluating their offers than they had been in the past.

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