The UK's largest companies are employing a record number of lawyers despite the tough economic climate, according to a survey of the FTSE 100 companies.

The survey, compiled by Legal Week's sister title, Legal Director, reveals that the total number of lawyers employed worldwide by companies in the FTSE 100 index stands at 4,034. This is a slight increase on the total of 3,891 lawyers in the same survey 12 months ago.

Other key findings include a significant rise in the number of female heads of legal – up from 14 to 20 – and a similar rise in the amount of US-qualified lawyers holding the top posts. (See below)

Oil giants Shell and BP have overtaken GlaxoSmithKline as the largest worldwide legal departments in the FTSE 100, with 400 and 370 lawyers respectively, while BT still has the largest UK team with 122.

The Legal Director FTSE 100 survey also shows that a number of the top jobs changed hands in 2001.

Among the 16 companies to get new heads of legal were Allied Domecq, BT, Invensys, Logica and Shire Pharmaceuticals.

The survey, conducted in association with Pinsent Curtis Biddle, questioned all 100 heads of legal of FTSE 100 companies in the final quarter of last year.

The news that overall lawyer numbers have risen comes as something of a surprise, given that during the course of last year many listed companies were forced to issue profit warnings and announce across-the-board job losses.

So where has this growth come from? The survey results show that the majority of additional lawyers are based overseas and that many have joined as a result of company acquisitions or mergers rather than because of organic growth. In the UK, the number of lawyers actually fell from 1,809 in 2000 to 1,712 in 2001.

According to Stephen Scott, group legal director at the UK's largest company, Vodafone, the reason why his department more than quadrupled in size – from 25 to 109 – last year was that lawyers from the Mannesmann acquisition were included for the first time. The German mobile phone company had sizeable contingents both in its own country and Italy.

Other companies to have significantly increased their headcount include gas group BOC, which saw worldwide numbers more than treble from 13 to 32, oil giant BP, up from 330 to 370, and Anglo-Swedish pharmaceuticals company AstraZeneca, which added eight overseas lawyers to make a total of 70.

HSBC, meanwhile, has seen the number of lawyers it employs across 78 countries rise to more than 300 from 225 last time around. In the UK it saw staff levels rise by 20 to 63.

The fact that the overall number of lawyers employed by FTSE 100 companies is up on last year would suggest that the high level of confidence among heads of legal – expressed in last month's Legal Director Benchmarker survey – is well founded.

In that survey, heads of legal reported that they were under little pressure to outsource their legal department. Asked to rate on a scale of one (no pressure) to 10 (a great deal of pressure), they gave an average score of just 2.89.

So does this mean that in-house lawyers are relatively protected from the axe?

The obvious answer is no. Although the overall figures may look positive, there have been some notable cutbacks in legal staff over the past 12 months.

For example, the legal department at Cable & Wireless, led by Dan Fitz, has seen the number of lawyers based in the UK halved to 25.

According to Leonard Quaranto, who joined Allied Domecq last summer from Kimberly Clark,
in-house lawyers cannot expect to be unaffected by across-the-board job cuts.

"Lawyers are part of the corporate centre – they are not in the profit centres," he says. "They will not be immune from any actions that boards take.

"Our legal department is pretty much static – what growth there has been has come from acquisitions such as the Bodegas y Bebidas deal in Spain."

However, it would appear from the survey that savage cutbacks, or even wholesale closures, of legal departments are, hopefully, a thing of the past. But given the continued pressure to keep costs down, one can never be sure.

Asked whether their legal spend had increased in 2001 compared with 2000, a significant majority said that it had gone up.

HSBC's Richard Bennett was one of the few who reported that legal spend was down.

"I would like to think that there was some logic to it because then I would get some praise for that," Bennett jokes, although he says that there were no major acquisitions in 2001 compared with those of Credit Commercial de France in 2000 or the Republic Bank of New York in 1999. He adds: "But we are not big spenders and we manage projects tightly."

Whether the numbers of lawyers will rise again in 2002 remains open to doubt. More to the point, whether there are significant reductions could well depend on the ability of heads of legal to keep a lid on external costs.

Should legal spend continue to rise inexorably, there seems little doubt that legal departments will have to share the pain.

Female heads of legal

The number of women heading the legal departments of the UK's top companies has increased significantly according to Legal Director's 2002 FTSE 100 survey. There are now 20 female UK heads of legal, up from 14 a
year ago.

This surge in numbers comes after female lawyers captured a large proportion of the posts that became available in 2001. Of the 16 heads of legal appointed last year, six were women.

Perhaps the most notable appointment was that of Anne Fletcher at BT, which remains the UK's largest legal department with 122 lawyers.

Fletcher had initially agreed to take over at the BBC, but was persuaded to stay at the telecoms giant following Alan Whitfield's departure to KPMG's tied law firm KLegal.

Other recently appointed female UK heads of legal include Victoria Hull at Invensys, Helen Jones at Kingfisher, Louise France at Sage and Clare Shepherd at Smiths.

The increase was welcomed by another new female head of legal, Tatjana May, who took the top job at Shire Pharmaceuticals last year.

"This is great news," says May, who joined from AstraZeneca where she was associate general counsel. "And there is no reason that the trend should not continue."

May refutes the suggestion made in some quarters that working in-house is somehow more 'female friendly' than private practice.

"There are a great number of able and gifted female solicitors and barristers working in industry," she adds.

Although this year's figures are a very positive sign, the trend for a greater percentage of female heads of legal is likely to be a gradual process.

This is partly because the number of posts that become available each year are likely to remain limited. With an average age of 45, there are many heads of legal that are a long way from retirement.

There is also simply a long way to go before the percentage matches the percentage of in-house lawyers that are female – close to half of the Commerce & Industry group's 5,000 members.

The good news on appointments does not mask the out-standing question of equal pay.

Remuneration was not addressed by this survey, but Legal Director's Benchmarker survey in June 2001 revealed that women who have made it to the top in-house positions still lag behind men when it comes to pay.

Female legal directors were found to be paid 26% less than their male counterparts, even though they were almost as likely to work for a large company. More than a quarter of female heads of legal (27%) were likely to work for a company with a turnover of £500m compared with one-third of men (34%).

So, while the survey provides welcome evidence of increasing opportunities for female in-house lawyers, there is still much to be done.

US heads of legal

One of the most arresting features of this year's survey of FTSE 100 legal departments is the increasing number of overseas lawyers holding the top job.

US-qualified lawyers now hold six posts as heads of legal at FTSE 100 companies. This figure will increase further later this year when Michael Parson retires from Smith & Nephew and is replaced by the medical devices company's US counsel Jim Ralston.

Companies with US lawyers in the top post include Leonard Quaranto at Allied Domecq, Dan Fitz at Cable & Wireless, Ben Keisler at Anglo American and Timothy Proctor at Diageo.

Meanwhile, Australian lawyer Ian Harman is general counsel at Brambles, the Anglo-Australian group created in August last year by the merger of Australia's Brambles Industries and the support services activities of the UK's GKN.

Gary Rinck, general counsel at Pearson, says his appointment two years ago – he joined from the London office of US firm Morrison & Foerster where he was managing partner – reflected the changing nature of the company's business.

"Pearson has probably two-thirds of its revenues out of the US," he says, adding that the company's chief executive officer, Marjorie Scardino, is American – and a lawyer – too.

"It is important to have someone who speaks the same legal language. From a communication perspective, it is good and worthwhile," he adds.

Pearson's US strengths are the result of major acquisitions such as the $4.6bn (£3.3bn) purchase of publishing group Simon & Schuster in 1998 and the commercial testing and educational services company National Computer Systems in 2000.

"What law applies tends to follow the revenues," says Rinck, who like Dan Fitz at Cable & Wireless, is dual-qualified. As a result, approximately two-thirds of Pearson's 40-strong legal team are based in the US.

It is a similar story at drinks group Allied Domecq, where Quaranto became general counsel last summer.

"The North American market is by far our largest market," Quaranto says. "This is a global company operating in a global market – the fact that it is part of the FTSE 100 is neither here nor there.

"This, therefore, fits in better with someone with my training – the UK accounts for approximately only 10% of our business."

However, Quaranto has substantial European experience in the consumer products business, Allied Domecq's market.

Previously head of legal at Kimberly Clark, he says: "I have spent 13 years in Europe and my entire career in the international area."

Quaranto adds that his extensive experience of M&A work was also attractive to the company because of the aggressively acquisitive approach taken by Allied Domecq under its chief executive Philip Bowman.