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Historically, general counsels at the nation’s largest companies enjoyed a certain amount of immunity from economic fluctuations. The past decade shows a nearly unbroken string of pay raises. Even through the previous recessions, these general counsels stayed largely untouched. However, according to a recent survey conducted by Corporate Counsel, it appears that this trend is no more.

While some indexes of general counsel pay rose, compensation by in large remained nearly flat. Why? Because executive pay has become inextricably bound with corporate performance. If the company doesn't do well, the GC might find a thinner pay packet. How thin? It's all relative. Make no mistake, these top company general counsels are still handsomely compensated for their hard work, but there is a chink in the armor.

General counsel at the nation’s top companies earned $1.8 million in pay and bonuses last year, an increase of 2.6%.

The breakdown, tallied by Corporate Counsel:

• Average salary was $596,393, an increase of 5%(⇑)
• Average bonus was $1.16M, an increase of less than 1% (⇑)

Bonuses were a combination of bonuses not tied to performance goals and “nonequity incentive compensation” paid for making performance targets.

"The world economy may be limping," reported Corporate Counsel. "Economic sectors like banking and manufacturing are still waiting for those green shoots to pop up, while the real estate market continues to search for the bottom. But last year the general counsel of the nation's largest companies still managed to get a modest raise."

Salary increases and generous bonuses generate great headlines. But that's not how most chief legal officers amassed their wealth over the years. One of the big attractions of being an in-house lawyer, in good times, at least, is the chance to own company stock. And that's held true even though the way companies distribute shares has changed dramatically.

At the same time, compensation tied to company shares fell:

• Average stock award was $1.1M, a decline of 18% (⇓)
• Average option award was $669,719, a decline of 7% (⇓)

Still, by the standards of a working population dealing with everything from mass layoffs to unpaid furloughs, top legal officers at Fortune 500 companies continued to earn a very decent living.

Usually the top paid corporate lawyer is the chief legal officer of a thriving big conglomerate. In the 2008 survey, however, the best-compensated lawyer was Gregory Doody, a bankruptcy expert hired to lead the Calpine Corp. out of bankruptcy, Corporate Counsel reports in a separate story. He took home $9.7 million in cash and bonuses last year; he has since left the company.

But those figures were tabulated last year. Will the overall picture for general counsels look bleaker in next year's survey? And will a sustained economic downturn in 2009 mean the end of $9 million bonuses, even for the general counsel of a thriving wireless telecommunications conglomerate? That remains to be seen

Here is the list of the 100 top-paid general counsels (total cash compensation):

1. Gregory Doody, Calpine Corporation, TX, $9,743,621
2. Donald Rosenberg, Qualcomm Incorporated, CA, $9,676,940
3. Brackett Denniston III, General Electric, CT, $7,050,200
4. Charles Wall, Philip Morris International Inc., NY, $4,194,538
5. Alan Braverman, The Walt Disney Company, CA, $4,032,885
6. Gary Lynch, Morgan Stanley, NY, $3,469,000
7. Paul Cappuccio, Time Warner Inc., NY, $3,050,000
8. Russell Deyo, Johnson & Johnson, NJ, $2,988,896
9. Carrie Dwyer, The Charles Schwab Corp., CA, $2,974,399
10. Louis Briskman, CBS Corporation, NY, $2,905,000
11. Thomas Strickland, UnitedHealth Group, MN, $2,692,115
12. Jon Walton, Allegheny Technologies Inc., PA, $2,587,733
13. Peter Beshar, Marsh & McLennan Companies, NY, $2,563,750
14. Michael Fricklas, Viacom Inc., NY, $2,440,300
15. Albert Cornelison, Jr., Halliburton Company, TX, $2,420,000
16. Alan Schnitzer, The Travelers Companies, NY, $2,350,000
17. Charles Matthews, Jr., Exxon Mobil Corp., TX, $2,332,305
18. Thomas Sabatino, Jr., Schering-Plough Corp., NJ, $2,181,343
19. David Horn, AK Steel Holding Corporation, OH, $2,033,372
20. Alan Crain, Jr., Baker Hughes Incorporated, TX, $1,976,595
21. Sheldon Cammaker, Emcor Group, Inc., $1,968,750
22. Marc Manly, Duke Energy Corporation, NC, $1,865,342
23. David Drummond, Google Inc., CA, $1,826,251
24. William Barr, Verizon Communications Inc., NY, $1,787,546
25. Laura Schumacher, Abbott Laboratories, IL, $1,761,508
26. Robert Armitage, Eli Lilly and Company, IN, $1,738,208
27. David Smith, Archer Daniels Midland Co., IL, $1,728,400
28. Julia Lambeth, Reynolds American Inc., NC, $1,725,850
29. Raymond Bukaty, Western Digital Corp., CA, $1,675,000
30. Leila Vespoli, FirstEnergy Corp., OH, $1,635,025
31. Marc Firestone, Kraft Foods Inc., IL, $1,634,904
32. Carol Ann Petren, Cigna Corporation, PA, $1,633,269
33. Douglas Sgarro, CVS Caremark Corporation, RI, $1,593,318
34. Richard Baer, Qwest Communications, CO, $1,566,209
35. Charles Tanabe, Liberty Media Corporation, CO, $1,534,752
36. J. Barclay Collins II, Hess Corporation, NY, $1,525,000
37. David Savner, General Dynamics Corporation, VA, $1,501,250
38. Arthur Block, Comcast Corporation, PA, $1,498,669
39. Brian Miller, The AES Corporation, VA, $1,494,938
40. Denise Keane, Altria Group, Inc., VA, $1,487,500
41. C. Michael Carter, Dole Food Company, Inc., CA, $1,485,094
42. John Halvey, NYSE Euronext, Inc., NY, $1,480,769
43. Jay Stephens, Raytheon Company, MA, $1,469,146
44. David Sudbury, Commercial Metals Company, TX, $1,385,810
45. Robert Sharpe, Jr., ConAgra Foods, Inc., NE, $1,387,019
46. J. Michael Hemmer, Union Pacific Railroad, NE, $1,353,000
47. W. Burks Terry, Northrop Grumman Corp., CA, $1,341,320
48. Grier Raclin, Charter Communications, Inc., MO, $1,339,327
49. Hyun Park, PG&E Corporation, CA, $1,320,804
50. Robert Osborne, General Motors Corporation, MI, $1,317,500
51. James Garraux, United States Steel Corp., PA, $1,298,340
52. Robert Reeves, Sr., Anadarko Petroleum, TX, $1,292,869
53. Larry Hunter, The DirecTV Group, Inc., CA, $1,285,753
54. C. Thomas Harvie, Goodyear Tire & Rubber, OH, $1,270,000
55. Bruce Kuhlik, Merck & Co., NJ, $1,246,271
56. Robert Walters, Energy Future Holdings, TX, $1,230,784
57. Thomas Boudreau, Express Scripts, Inc., MO, $1,216,292
58. Bryan Hall, Virgin Media Inc., NY, $1,206,891
59. Noah Hanft, MasterCard Incorporated, NY, $1,198,250
60. Steven Cossé, Murphy Oil Corporation, AR, $1,195,833
61. Robert Schoonenberg, Avery Dennison Corp., CA, $1,192,958
62. Joshua Floum, Visa, Inc., CA, $1,185,981
63. Frank Steeves, Emerson Electric Co., MO, $1,160,000
64. Terrence Linnert, Goodrich Corporation, NC, $1,156,515
65. Donald de Brier, Occidental Petroleum Corp., CA, $1,151,000
66. Gregory Butler, Northeast Utilities, CT, $1,142,216
67. Steven Covey, Navistar International Corp., IL, $1,135,000
68. Ellen Kaden, Campbell Soup Company, NJ, $1,133,333
69. Joseph Listengart, Knight Inc., TX, $1,133,077
70. Leonard Kennedy, Sprint Nextel Corporation, KS $1,132,895
71. Ira Lederman, W.R. Berkley Corporation, CT, $1,115,435
72. Peter Janzen, Land O’Lakes, Inc., MN, $1,111,915
73. Vincent Maffeo, ITT Corporation, NY, $1,105,431
74. Kevin Lilly, SPX Corporation, NC, $1,105,000
75. Javade Chaudhri, Sempra Energy, CA, $1,104,687
76. Dwight Rettig, National Oilwell Varco, Inc.,TX, $1,098,696
77. Vernon Baker II, ArvinMeritor, Inc., MI, $1,096,567
78. Ellen Fitzsimmons, CSX Corporation, $1,092,500
79. J. Michael Luttig, The Boeing Company, IL $1,092,418
80. James Benson, ADP, Inc., NJ, $1,087,314
81. Cheryl Hodges, Omnicare, Inc., KY, $1,081,689
82. James Hixon, Norfolk Southern Railway Co., VA, $1,078,750
83. James Breedlove, Praxair, Inc., CT, $1,061,050
84. Susan Lanigan, Dollar General Corporation, TN, $1,048,179
85. Bart Colli, ARAMARK Corporation, PA, $1,037,981
86. Scott Rozzell, CenterPoint Energy, Inc., TX, $1,035,513
87. Kenneth Siegel, Starwood Hotels & Resorts, NY, $1,032,303
88. David Leitch, Ford Motor Company, MI, $1,000,000
89. Joey Loudermilk, Aflac Incorporated, GA, $983,588
90. Hayward Fisk, Computer Sciences Corporation, VA, $979,050
91. Mitchell Kosh, Polo Ralph Lauren Corporation, NY, $972,188
92. Richard Mack, The Mosaic Company, MN, $964,167
93. Charles Fenton, Black & Decker Corp., MD, $960,000
94. Roger Cooke, Precision Castparts Corp., OR, $925,500
95. Gary Bahler, Foot Locker Inc., NY, $901,421
96. Gary Chadick, Rockwell Collins, Inc., IA, $897,420
97. William Casazza, Aetna Inc., CT, $895,491
98. R. Edwin Selover, Public Service Enterprise, NJ, $888,325
99. James Diggs, PPG Industries, Inc., PA, $872,500
100. Curtis Shaw, Celanese Corporation, TX, $872,114

Here is the list of the top paid women general counsels (total cash compensation):

1. Carrie Dwyer, The Charles Schwab Corp., CA, $2,974,399
2. Laura Schumacher, Abbott Laboratories, IL, $1,761,508
3. Julia Lambeth, Reynolds American Inc., NC, $1,725,850
4. Leila Vespoli, FirstEnergy Corp., OH, $1,635,025
5. Carol Ann Petren, Cigna Corporation, PA, $1,633,269
6. Denise Keane, Altria Group, Inc., VA, $1,487,500
7. Ellen Kaden, Campbell Soup Company, NJ, $1,133,333
8. Ellen Fitzsimmons, CSX Corporation, $1,092,500
9. Cheryl Hodges, Omnicare, Inc., KY, $1,081,689
10. Susan Lanigan, Dollar General Corporation, TN, $1,048,179

For a detailed breakdown of base, bonus, and options click on this link.

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.]

Will law firm associates get their bonuses in 2008? That’s the questions the New York Law Journal has been asking as law firms re-evaluate the value of associate bonuses. While I empathize with associates who regularly bill 3,000 hours in the hopes of one day being rewarded with partnership, or at least getting a good bonus, I am more concerned about bonuses for in-house counsels. How will this recession impact in-house counsel bonuses?

In the last few years, the compensation trend for in-house counsels favored deferred compensation over cash salaries. Extra incentives such as bonuses and stock options were a significant component of in-house compensation packages. A typical bonus for most in-house counsels ranged between 20%-40% percent of the base, and sometimes much more depending on the position and company.

Although stock options and equity vary too greatly to be given a range; they nevertheless comprised a significant portion of an in-house counsel’s compensation package, especially for more senior level counsels (GC’s, CLO’s, Deputy Counsels, etc.)

Given that deferred compensation – which is basically tied to company performance – easily adds up to 50% of an in-house counsel’s overall compensation, the impact of this recession will be felt deeply by in-house counsels across the country. Although amid this financial credit crisis some top executives will forego their annual bonuses, 2008 bonuses will still be viable for most in-house counsels. 2009 on the other hand will be a year of serious belt-tightening across the board.

U.S. chief legal officer total cash compensation (salaries plus bonuses) increased by more than 13 percent this year to $467,100, according to the 2008 Law Department Compensation Benchmarking Survey.

While median salaries rose just seven percent, median bonuses grew by almost 27 percent. The study analyzes compensation data for more than 7,000 lawyers in 312 corporate law departments across the country.

While CLO compensation increased, however, total cash compensation for deputy chief legal officers, division general counsel and managing attorneys decreased during the same period, by 6 percent, 2 percent and 0.3 percent, respectively. This year's results also include the following:

• CLOs in departments with more than 25 lawyers earned $771,000 in total cash compensation, 65 percent more than the national median. In contrast, CLOs in one-lawyer departments earned $240,000, 49 percent less than the national median.

• For non-management positions, intellectual property or patents is the most lucrative specialty for senior attorneys and attorneys. Senior IP attorneys took home 40 percent more than the national median total cash compensation last year.

Approximately 44 percent of participants were in organizations with 5,000 or more employees. The largest group of participating law departments was from organizations with annual sales revenues of over $10 billion.

What about 2009? At ESQ Recruiting, we predict that bonuses will be the hardest hit, and expect lower increase in compensation across the board – we anticipate a decrease for U.S. chief legal officer and salary freezes for other counsels.

[Report prepared by: Incisive Legal Intelligence's survey group, a division of Incisive Media, parent company to leading legal media including The American Lawyer, The National Law Journal and Legal Week.]

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
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.