At some point in our lives, we would all give a pound of flesh just to make partner, but the reality is that many partners experience buyer’s remorse. Maybe some don’t enjoy business generation, balk at the price of capital contributions, feel too much pressure, and so on. The more partners make, the more they get accustomed to the means to fund their lifestyles, school loans, children’s private schools, or simply a taste for extravagance.
Given your partner compensation, would you seriously consider a general counsel job?
As we’ve explored in the past, partner compensation tends to be fairly transparent; firms will generally pay you 33% on your book up to around five million (at which point more associates and staff are needed to service your work so you get paid less and less of what you generate).
The main assumption about “going in house” is that you won’t get paid as much compared to making partner. This is not necessarily true. In the past few years, a median partner at a Biglaw firm has made about $680,000 compared to a median general counsel who made around $600,000. While $80,000 is a sizable difference, the gap between in-house pay and Biglaw pay is not as stark as many believe.
When you break down general counsel pay by years of experience, the gap closes significantly. For attorneys with 6-10 years of experience—within the junior partner threshold—these general counsels made nearly $800,000 on average, $120,000 more than their Biglaw counterparts—though the median still hovers around $600,000.
It is not completely fair, however, to compare the 200 most profitable law firms with the entirety of the corporate space. When examining compensation by company profits, general counsel compensation becomes suddenly more appealing.
General counsels at companies with over $10 billion in revenue made around $1 million. To put this into perspective, there are 63 companies that have revenue streams of over $100 billion a year, and around 950 total public companies (and many more private ones) with cash inflows greater than $10 billion a year. Remember an obvious market constraint. There is only one general counsel while each law firm could have hundreds of partners.
Now that we have established that general counsels aren’t pinching pennies when compared to their law firm counterparts, what are the variables to consider when benchmarking general counsel compensation?
- What is the size of the legal department? The correlation between the size of the company—and hopefully their revenues—and the size of their legal department, is probably pretty linear. When you join a large company, you are not only managing more issues that come up (from FCPA litigation and employment disputes to acquisitions and executive compensation), but you are also managing potentially dozens of attorneys as well. The upside is, you are well compensated for your responsibilities. The median total compensation for a general counsel managing over 25 attorneys is $1,003,400, comparable to that of a Biglaw partner. The survey recorded compensation in excess of 1.4 million, meaning a top general counsel would earn roughly what a partner with a $6 million dollar book would make.
- What do your competitors pay their general counsels? A good benchmark for general counsel pay is simply what your closest competitor pays their general counsel. Some companies put a higher premium on attorneys, so while you might work at a $100 billion dollar company, you might end up getting paid less than a general counsel at a $10 billion dollar company. By looking at competitors you can better ascertain the importance the company places on legal counsel and ballpark your total compensation.
- What did the company’s CEO, CFO, and COO make? Generally, business decision makers will always make more than any legal counsel. If the company paid the COO $500,000 last year, don’t count on more than that. Executive compensation is easy to find online and can be a good resource to estimate general counsel compensation.
- How does the company pay their general counsel? Corporations often deploy intricate compensation packages that make NFL contracts look like basic arithmetic. Some structures offer long-term cash incentives that lead into eight digits while others offer equity, but most offer a combination of salary, bonuses, and stock options to diversify the pay. The variability of the stock’s worth can either greatly increase your compensation, or decrease it, which is another reason to consider the company’s financials before joining.
Going in-house can be intimidating. The opaque pay scale, new responsibilities, and political culture can seem overwhelming. Executives considering making such a career move would normally have questions about entering the in-house market and what a fair market rate would be for your services; or, if they are a current in-house attorney they may be looking to benchmark their current pay against that of the market. Whatever the questions, it would be worthwhile for executives to seek such answers to maximize their compensation package and arm themselves with relevant information to make their pitch more credible and realistic.