General counsel pay still bolstered by bonus culture

The bonus, not the pay rise, was how companies rewarded the efforts of their general counsel (GC) in 2012. This reflects a changing rewards system for GCs, and caution from the managers who employ them.

These are the findings from two recent studies on wages for in-house lawyers. The first survey from UK employment research organisation, Incomes Data Services (IDS), showed average pay increases fell below the retail prices index last year.

Salaries rose by just 2.7% in the year to September 2012, while inflation averaged 3.7%. The picture was similar for 2011, when salaries rose by 2.8% versus UK inflation at 5%.

And, as management tighten their reins, median salaries for in-house lawyers now range from £122,604 for heads of legal, down to £48,273 for in-house solicitors, according to IDS.

The data comes from 82 UK-based companies, employing 1,351 in-house lawyers across finance, manufacturing, retail, transport, and not-for-profit organisations. However, bonuses were up for 2012, with median cash bonuses of £29,258 for heads of legal.

‘Our research found that 66% of in-house lawyers got a bonus.’
Georgina Maudslay,
Laurence Simons

Georgina Maudslay, consultant at legal recruiter Laurence Simons, said: ‘It’s been a tough year for in-house lawyers. However, our own research found that 66% got a bonus. This increased from 32% of their salary in 2011 to 38% in 2012. This shows that bonuses are being used to reward staff for their hard work throughout the year.’

Laurence Simons surveyed 613 in-house lawyers at corporations across several sectors, and included all types of roles, from GC to head of legal.

However, one banking GC said: ‘Although bonuses can be quite generous, this year is not going to be particularly good. You may think that the GC of a billion-dollar company who is coming up with very sophisticated, tax-driven structures to save money will be rewarded, but it’s few and far between.’

Others have called for a reality check. Tony Williams, principal of Jomati Consultants, said: ‘Corporates are cutting costs all round and the feeling is: you can get 2% or you can go. The good news is that you have a job in 2013. That sounds a bit brutal, but welcome to the real world.’

Stuart Greenland, GC recruiter at First Counsel, said that the salary slide reflects the supply and demand of a drained market where in-house lawyers are earning less. He said: ‘It’s just symptomatic of a flat economy really.’

Today, in-house lawyers are taking on more strategic roles and it is a tougher and more demanding job. This new terrain has been shaped by the growing demands of regulators and investors worldwide, and by increased risks of litigation. Roles are becoming more strategic and more pressurised as counsel take on a more ‘control’ function. A changing rewards system, and a tougher economic climate reflects this.

‘Legal departments have moved from almost being a “captive” law firm to a much more integral part of the business; they are more strategic and involved in board discussions,’ said Williams. ‘The pressure is on everybody.’

Both studies show that while salary increases are hard to come by, other employment benefits can boost overall pay packages. Nasreen Rahman, researcher at IDS, added that while in-house lawyers may miss out on the larger bonuses, salaries and profit shares on offer in private practice firms they are willing to trade this off for a better work-life balance with regular working hours.

But another banking GC said that there are gross misconceptions from both management and private practice lawyers about what happens when you move in-house. ‘The perception is that it’s going to be a lot easier, but talk about the work-life balance is not true. There is also a lot of pressure and competition for GCs to maintain their role, as they can be replaced very easily,’ they said.

The stark reality is that unlike law firm partners, GCs are generally regarded as service providers rather than fee generators.

Deborah Prince, head of legal at the British Heart Foundation, said that given the option of money or fulfilment, in-house lawyers make their own choices. She said: ‘Unless you’ve been doing some major project that has saved the organisation, then you might not get a bonus because management will tell you: “well that’s your job’’.’

Williams added that although incomes may be fairly subdued for GCs at the moment, the pressure should encourage good corporate practice. ‘GCs will build relationships with the senior leaders, understand the commercial realities and navigate them through the legal minefield they are operating in,’ he said. ‘That value will be very much appreciated, and those not giving good enough commercial advice will be very much exposed.’