2009 Brought the Largest Drop in Lawyer Headcount in Thirty Years
The results of the 32d annual National Law Journal survey of the nation's 250 largest law firms provides a vivid picture of the toll that the economic recession exacted from law firms this year. The total number of attorneys working at the top 250 law firms plunged by 5,259 lawyers. How significant is this loss? According to the article, it's as if all of the lawyers working at two firms the size of Jones Day vanished in 2009.The number of attorneys in 2009 sank to 126,669 lawyers, compared with 131,928 attorneys last year. In 2008, the number of attorneys increased by 4.3 percent. This is only the third time since 1978 that lawyer counts has dropped.
Which of the 75 law firms on the NLJ list bled the most in 2009?
- Fried, Frank, Harris, Shriver & Jacobson, which declined by 26.4 percent to 468 attorneys from 636 in 2008.
- Latham & Watkins, which shed 444 lawyers, had the biggest number of layoffs. It had 1,878 attorneys this year, compared with 2,322 in 2008, for a 19.1 percent decline.
- Taking the No. 1 position on the NLJ 250 was Baker & McKenzie, which had 3,949 attorneys.
- DLA Piper took the No. 2 spot this year. Its lawyer population fell by 7.3 pecent, to 3,450 attorneys from 3,721 attorneys in 2008.
Associates were the hardest hit by layoffs; their rank shrank by 8.7 percent, to 61,733 from 67,648 last year.
Partners, on the other hand, seem to be doing better as a whole. The number of partners in 2009 was 53,468, compared with 52,980 in 2008, an increase of 0.9 percent.
Perhaps the most worrisome numbers are those of first-year associates whose start dates law firms deferred. Of the 250 firms on the list, 113 reported that they deferred a total of 2,784 associates. That figure represents 42 percent of the 6,636 law graduates who would have been in the incoming first-year associate class.
This will have a major impact on the future of employment for both current and would-be lawyers that have recently graduated. The unemployment rate hit 10.2 percent in October. All told, 15.7 million Americans are out of work. Lawyers are no exception.
The legal sector lost 5,800 jobs, according to seasonally adjusted statistics in a recently released report (PDF) from the U.S. Bureau of Labor Statistics. When not seasonally adjusted, the figures show a gain of 1,500 jobs, but that is probably attributable to the elimination of summer associates from law firm payrolls, reports the Am Law Daily.
What can these unemployed lawyers expect from the job market? Many are looking at a long road ahead, often looking for 6-12 months before gaining employment. Grim figures that are unlikely to change in the near future, especially with the end of the year closing in, which traditionally provides for additional layoffs.
[Leigh Jones, The National Law Journal, November 09, 2009]
In-House Compensation Remains Flat As Companies Continue Cost-Cutting Measures
Over the last 18 months, the press has well documented the various efforts by corporate law departments to cut cost, including reducing outside counsel expenses. According to a new Hildebrandt survey, in-house counsels have also been impacted by these measures, namely in terms of their compensation.While this is an accurate statement; there are other factors at work that are negatively impacting in-house counsel compensation that were not addressed in this article.
Existing In-House Counsels vs. Newly Hired In-House Counsels.
If existing in-house counsels at Fortune 500 Companies are not enjoying increases in their base salaries, newly hired in-house counsels are seeing a significant dip in base salaries. It’s a supply and demand market, and the majority of law departments hiring in-house counsels are offering packages that are notably lower than those they were offering to in-house counsels just a year ago.
An existing counsel pondering whether he/she will get a 3-8% percent increase on a compensation package of over $200,000, is quite different from a newly hired counsel with the same level of experience and practice area looking at a compensation package of $150,000 or less. If cost-cutting measures have not had a significant impact on the overall compensation package of existing in-house counsels, they have had a disparate impact on the compensation package of newly hired in-house counsels. It’s a tale of two cities between new hires and existing counsels.
Cash Compensation and Company Performance.
According to the ABA article, when Hildebrandt asked companies responding to the 2009 survey to report total cash compensation numbers for March 2008 and 2009, they reported a year-over-year increase of 3 percent. Last year’s survey reported a year-over-year increase of 8 percent in total cash compensation.
The decrease in cash compensation may not only be related to company cost-cutting measures, but also to company performance. It is a well-known fact that in-house bonuses are tied intimately to personal as well as company performance. A dip in overall cash compensation could most likely be attributed to a decrease in overall profit or lack thereof as a result of the recession, rather than cost cutting measures.
Fortune 500 In-House Counsels vs. Others.
If the average total cash compensation—base salary plus cash bonuses — for in-house lawyers in March 2009 was $229,000 — those figures are not reflective of the overall in-house legal market. Those figures are representative of senior counsels, with typically 10 years or more of practice experience, working at companies with a minimum of $9 billion in revenues with at least 30 lawyers, 18,000 employees and $28.0 million in total legal spending – in other words, primarily Fortune 500 Companies. That’s a sliver of the in-house legal market. Median cash compensation for most in-house senior counsels, typically falls between the $100,000 and $150,000 mark.
Here are the other findings that The Intelligencer and Hildebrandt reported from their Fortune 500 survey:
- The average total cash compensation—base salary plus cash bonuses—was $229,000 for in-house lawyers in March 2009.
- The average total cash compensation—base salary plus cash bonuses—was $236,000 for in-house lawyers in March 2008 survey.
- 18% of the respondents anticipated a decrease in the number of in-house lawyers in their departments.
- 30% of the respondents anticipated an increase in the number of in-house lawyers in their departments. The numbers reflect a cost-reduction strategy of bringing more work inside that had been done by outside counsel, according to the press release.
- Nearly a 1/3rd of the respondents expect to use fewer outside firms in the United States. Only 8 percent expect to increase the number of law firms they use.
- 46% of the responding companies anticipate that alternative billing arrangements will make up more than 11 percent of their outside legal budget, compared to 33 percent last year.
- Total legal spending increased by 5 percent in the United States, the same rate of increase as the year before.
Corporate Legal Department Layoffs: The Market in 2009 (February)
As we had predicted earlier, the nation's unemployment rate rose to a higher-than-expected 7.6 percent in January as businesses shed 598,000 jobs, the government says.
The economy has lost a staggering 3.6 million jobs since the start of the recession in December 2007. And, to underscore the accelerating nature of the problem, more than half of those job losses occurred in the in the past three months. As of the end of January 2009, a total 11.6 million were unemployed.
The official government estimates of the current unemployment problem are staggering.
- 791,000 manufacturing jobs were lost in 2008, hitting the auto sector hardest.
- 260,110 people lost jobs in the financial sector, part of the overall service sector that accounts for some 80% of all employment.
- The construction sector shed 899,000 since peaking in September 2006.
- The retail sector shed 522,000 jobs for all of 2008.
Those are the “official” government numbers. But, as a closer look demonstrates, the unemployment figures can be understated – and misleading. The government actually compiles unemployment figures in six different categories; as you might expect, the numbers tend to minimize the bad news.
Job hunters also are facing longer searches for work.
The average time it took for an unemployed person to find any job — full or part time — rose to 19.8 weeks in January, compared with 17.5 weeks a year ago, underscoring the increasing difficulty the out-of-work are having in finding a new job.
- Caterpillar (20,000)
- Pfizer (8,000)
- Sprint Nextel (8,000)
- Home Depot (7,000)
- General Motors (2,000)
- Microsoft/Intel (10,000)
General Electric has also been quietly doing some bloodletting since the third quarter of 2008; and while the figures we have gathered are not official - as they have been culled from laidoff GE attorneys - we estimate that at least 20% of its legal department has been affected. Following its purchase by Wells Fargo, Wachovia has also suffered deep cuts in its legal department, somewhere in the 30-50% range.
The list of corporate legal department is most likely a long one, yet details of these layoffs are usually not publicized, and often difficult to obtain. While companies for the most part do not provide separate figures for their corporate legal department layoffs, company-wide layoffs usually affect in-house legal department as well.
As reported by Above the Law, Incisive Media also eliminated 42 positions last week. These layoffs were distributed across positions in both business and news departments in the entire company's North American units, which includes 31 legal and real estate publications. Legal media, and the media industry in general, have not been spared.
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.
Inside Counsel’s Blog Review of InHouse Insider
InHouse Insider is honored to report that it was featured in the November 2008 issue of Inside Counsel’s Blog Review. InHouse Insider has always considered Inside Counsel to be a preeminent news source for in-house counsels, and was delighted to be included in their magazine.
People say you can find anything on the Internet for any niche imaginable. General counsel are no exception.
Vanessa Vidal, founder and president of ESQ Recruiting, and Leslie White, a managing director at the company, update the blog each week. "What we wanted to do was share [our expertise] with not only our clients and candidates but with everyone and anyone interested in the in-house legal market," Vidal says. Without unnecessary fluff, Vidal and White keep readers abreast of statistics and industry trends. But it's not all serious. In August, the bloggers posted a roundup of the top 25 legal movies, which highlighted To Kill a Mockingbird and the comedy classic My Cousin Vinny.
-Christopher Danzig
Inside Counsel
Blog Review
November 2008
2009 Predictions for In-House Legal Departments
Nearly 75 percent of general counsels responding to a November survey by legal consultants Altman Weil said their legal departments are facing budget cuts averaging 11.5 percent next year.
- 65% said they would bring more legal work in-house.
- 57% of in-house counsel at companies with revenues of at least $1 billion said they plan to reduce their number of outside law firms.
- 53% said they would give additional work to lower-priced outside lawyers.
- 50.5% said they would require more outside fee arrangements.
- 31% plan to cut lawyer and administrative staff in 2009.
- 21% plan to cut paralegal positions in 2009.
The decline of in-house counsels has been slight, but steady. The median company employs 3.8 lawyers per billion dollars of U.S. revenues. In the last four years, the number was greater, ranging from 4.2 to 4.7 lawyers per billion dollars of U.S. revenues.
What about projected in-house counsel hiring?
Before Wall Street’s economic meltdown, during the first quarter of 2008, 32.3% of the nation's chief legal officers and general counsels expected to hire more in-house lawyers within a year, 54.6% did not, and 13.1% weren't sure. These numbers have most likely shifted, with fewer companies looking to hire in-house counsels, but the difference might not be as salient as one would guess.
Throughout May and June, Altman Weil surveyed chief legal officers and one of the questions was about hiring new attorneys in the next 12 months. At that time, nearly 50 percent said they were looking to bring on new attorneys. However, during a flash survey conducted by Altman & Weil on department cost control in November, only 25 percent said they would add new attorneys.
In October of 2008, about a third of in-house counsel responding to a survey by the law firm Fulbright & Jaworski were projecting an increase in legal disputes involving their companies for the coming year—and nearly 20% predicted the need to hire more in-house lawyers to manage the expected increase.
While the hiring projections centered mainly on an increase in litigation – some of the legal areas that will require additional attention from in-house counsels will include compliance, regulatory issues, employment matters, intellectual property, and international transactions.
Although the majority of general counsels will look to do more with fewer attorneys, we predict that about 30% will be look to hire additional in-house counsels to handle the additional work in-house, and reduce their outside counsel expenses.
What about compensation?
In-house lawyers in larger companies made an average of $236,000 in pay and bonuses in 2008, up from $226,000 in 2007. But 2009 levels promise to be on the decline, especially at a time when in-house staffing is softening.
- 29% plan to cut lawyer compensation.
- 19% say they will reduce staff compensation.
Of those companies not cutting lawyer compensation, we can expect the majority of salaries to remain at status quo, and a minority to increase by a lower margin (expected 5% increase in 2009, over 8% in 2008, and 10% in 2007).
What about bonuses?
- 31% plan to reduce lawyer bonuses in 2009.
- 22% plan to cut staff bonuses in 2009.
What does this mean for in-house lawyers?
At the last tally, some 7,300 attorneys nationwide had gotten the ax since June 2008, with more layoffs expected before the end of the year according to the New York Law Journal, in an article reprinted in New York Lawyer (reg. req.). Fewer companies are planning to hire, in the coming year, and more are looking to reduce legal staffing.
In order to secure their positions, in-house counsels will end up having to work more for less money. They will also work with less support – both in terms of outside counsels and internal administrative assistants and paralegals. Resources will be stretched thin. However, most counsels will look to stay with their current companies, as in-house hiring rates will be down in the coming year, and the competition for fewer positions in the marketplace will be more intense than ever.
While 65% of general counsels said they would bring more legal work in-house, 31% plan to cut lawyer and administrative staff in 2009. In other words, in the current economic climate, in-house counsels may be subject to layoffs. They will need to take proactive steps to avoid receiving a pink slip. In-house counsels will have to do more with less, to show greater flexibility, to take on new and added responsibilities, learn new skills especially in the areas of compliance/regulatory matters, and be able demonstrate their value and cost-saving effectiveness.
Female GCs at Fortune 500 Companies Double in The Last Decade
The number of top women lawyers at Fortune 500 companies has risen to 92 from 44 when the Minority Corporate Counsel Association first started counting nearly 10 years ago.The state with the largest number of female GCs is New York, which has 14, followed by 11 in California, eight in Texas and seven each in Illinois and New Jersey, according to the Fulton County Daily Report.
The MCCA survey, which profiles several of the GCs, is featured in last month's Diversity & the Bar magazine.
Among those profiled are Margaret M. Foran of Sara Lee Corp., Joia M. Johnson of Hanesbrands Inc., Kathleen M. Cronin of CME Group, and Elisa D. Garcia C. of Office Depot, Inc.
"At a time when the U.S. financial markets are taking a beating and the economy is creating difficult times for our nation's top companies, it's encouraging to see that more women lawyers are serving as the chief legal officer to whom CEOs turn to lead the company through today's legal and regulatory challenges," Veta Richardson, MCCA's executive director, tells the Daily Report.
The Biggest In-House Employers
The top 200 corporate law departments in U.S. companies employed ~27,700 lawyers in 2006 (InsideCounsel).
The largest corporate law departments in U.S. companies in 2006 were:
- Citigroup (1,500 lawyers)
- GE (~1,200 lawyers)
- Liberty Mutual (~775 lawyers)
- State Farm (~720 lawyers)
- Allstate (~700 lawyers)
- Exxon was sixth, with 600 lawyers
- In 1997, the 200 largest law departments had a total of ~19,400 lawyers, and thus grew by a total of ~8,300 over nine years, for an average annual growth rate of 4.8%.
- In 1997, the AmLaw 100 had a total of ~42,600 lawyers, and in 2006 the AmLaw 100 had a total of ~70,100 lawyers (AmLaw), and thus grew by a total of ~27,500 lawyers over nine years, for an average annual growth rate of 7.2%.
- Put differently, in 1997, the AmLaw 100 had 2.2x as many lawyers in it as the 200 largest corporate departments; by 2006, the AmLaw 100 had 2.5x as many lawyers in its as the 200 largest departments.
Corporate Counsel Compensation Survey (2008)
The Top 10 GC Cash Compensation Packages.
This year's top paid GC's, in combined salary, discretionary, and incentive form:
1 Jon Walton Allegheny Technologies Incorporated $8,133,733
2 Gary Lynch Morgan Stanley $6,608,375
3 Thomas Russo Lehman Brothers Holdings Inc. $5,000,000
4 Alan Braverman The Walt Disney Company $4,450,000
5 Louise Parent American Express Company $3,969,591
6 Richard Massey Alltel Corporation $3,859,492
7 Paul Cappuccio Time Warner Inc. $3,600,000
8 Russell Deyo Johnson & Johnson $3,515,816
9 Louis Briskman CBS Corporation $3,305,000
10 Gary Jacobs MGM Mirage $3,260,332
The Best Industries.
Industries with five or more GCs among the 100-best paid legal officers:
Aerospace and Defense
Jay Stephens Raytheon Company $1,415,461
David Savner General Dynamics Corporation $1,215,000
Terrence O'Donnell Textron Inc. $1,207,500
Kathleen Karelis L-3 Communications Holdings, Inc. $1,200,000
Roger Cooke Precision Castparts Corp. $1,191,375
Terrence Linnert Goodrich Corporation $1,023,818
Entertainment
Alan Braverman The Walt Disney Company $4,450,000
Paul Cappuccio Time Warner Inc. $3,600,000
Louis Briskman CBS Corporation $3,305,000
Michael Fricklas Viacom Inc. $2,809,875
Lawrence Jacobs News Corporation $2,650,000
Telecommunications
Richard Massey Alltel Corporation $3,859,492
Richard Baer Qwest Communications $2,063,676
William Barr Verizon Communications Inc. $1,848,000
Larry Hunter The DirecTV Group, Inc. $1,399,276
Grier Raclin Charter Communications $1,119,342
James Ellis AT&T Inc. $1,075,431
Utilities
Hyun Park PG&E Corporation $1,786,149
J.A. Bouknight, Jr. Edison International $1,288,714
Marc Manly Duke Energy Corporation $1,286,547
G. Edison Holland, Jr. Southern Company $1,246,997
Randall Mehrberg Exelon $1,143,345
William Torgerson Pepco Holdings, Inc. $1,117,977
Gregory Butler Northeast Utilities $1,114,194
Javade Chaudhri Sempra Energy $1,068,554
R. Edwin Selover Public Service Enterprise $956,463
Scott Rozell CenterPoint Energy, Inc. $835,800
The Top Best-Paid Women GC's in the Top 100.
These 12 women made the list of the 100 top-paid GCs:
Louise Parent American Express Company $3,969,591
Carrie Dwyer The Charles Schwab Corporation $3,200,048
Carol Ann Petren Cigna Corporation $2,710,962
Lauri Shanahan The Gap Inc. $1,557,116
Kathleen Karelis L-3 Communications Holdings, Inc. $1,200,000
Ellen Kaden Campbell Soup Company $1,127,377
Suzanne Bettman R.R. Donnelley & Sons Company $1,092,824
Maura Smith International Paper Company $1,074,425
Fay Chapman Washington Mutual, Inc. $1,062,000
Mary Gustafsson Trane Inc. $1,025,700
Candace Cummings V.F. Corporation $981,000
Laura Stein The Clorox Company $925,000
Average $ 1,660,504
The Biggest GC's Bonuses From the Top 100.
Last year’s largest bonuses, in combined discretionary and incentive form:
Jon Walton Allegheny Technologies Inc. $7,720,000
Gary Lynch Morgan Stanley $6,308,375
Thomas Russo Lehman Brothers Holdings Inc. $4,550,000
Alan Braverman The Walt Disney Company $3,450,000
Richard Massey Alltel Corporation $3,343,338
Russell Deyo Johnson & Johnson $2,746,200
Carrie Dwyer The Charles Schwab Corporation $2,701,715
Paul Cappuccio Time Warner Inc. $2,600,000
Gary Jacobs MGM Mirage $2,560,332
Source: Corporate Counsel Survey, August 2008.
GCs Cutting Back on Outside Firms, But Planning To Hire More In-House
According to the survey, 49% of Chief Legal Officers participating in the survey plan to extend their in-house capabilities by hiring additional lawyers in the next year, jumping from 40% last year.
In addition, 26% of law departments plan to decrease their use of outside counsel – up significantly from 16% in last year’s survey. Only 8% of CLOs plan to increase their use of outside counsel, down from 18%.
“It’s interesting that in this economy, with many CEOs reportedly planning layoffs, Chief Legal Officers are planning to hire more lawyers,” notes Altman Weil principal Daniel J. DiLucchio. “This reflects the pressure law departments are under to control costs and to do more work in-house where they are paying ‘wholesale’ instead of ‘retail’ for legal services.”
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