More corporate counsel following Wal-Mart to demand detailed information from advisers who try to push through higher charge-out rates as clients push outside counsel for more transparency. Michelle Madsen reports

General counsel are pressing advisers for more internal information about how they run their business, according to new research which shows that half of the companies surveyed ask external counsel about their salary levels.

According to the results of this month's The Verdict survey, conducted in association with Davies Arnold Cooper, 50% of corporate counsel ask their advisers for information about how much they pay their lawyers either 'often' or 'sometimes'. A further 22% said they requested such information occasionally.

The finding comes amid growing feelings that internal recruitment costs are being passed on to clients in the form of higher rates and suggests that the response of corporate counsel will be to demand more information from their law firms.

The results come just weeks after US retail giant Wal-Mart released a memo to its advisers demanding that they freeze charge-out rate increases, saying that it would only consider individual requests for rate increases for top-performing lawyers proven to have "added value". Wal-Mart's robust approach to rate increases was spurred by the supermarket chain's concerns over the impact of associate pay rises on legal rates.

The Verdict poll found that 56% of clients had asked their firms to stop putting up their charge-out rates. According to the poll, UK corporate counsel are also increasingly concerned by law firms' transparency over what drives charge-out rates, with 84% saying they felt advisers should offer detailed explanations to clients every time they considered raising their charge-out rates, with a further 11% stating that firms should offer details of rates to clients when asked.

While the majority of corporate counsel want to keep a close eye on their firm's salary policies with a mind on how it may affect their bills, a handful of in-house lawyers say that it is not their concern how firms decide salaries and rates. Five percent of respondents claimed that they did not expect any transparency from firms over rates and more than a quarter (26%) said that they felt that firms' salary policies are their own business.

Gulf Oil UK general counsel Richard Hoare argued that too much focus on how associate salaries affect rates could distract attention from the service provided.

"Our firms generally give details of their rates at the beginning of a job – they are very transparent with
us," he said. "However, important as cost is, it is not the most important element of a relationship."

One general counsel at a major investment bank said that they watched associate salaries not so much to see what impact increases would have on external spend, but to judge the expectations of candidates in the recruitment market. "We keep a close track on what associates are being paid; our staff do as well. Firms are very real competitors in the war for talent and associate salaries are a very clear indicator of what is going on in the market – not so much as a tool to keep down external legal spend but as an indicator of what recruits expect to be paid."

A number of clients said that concerns about charge-out rates, which can often top £600-an-hour for a senior City partner, have been eased by the trend for law firms to discount their rates, often in return for volume of instructions.

One respondent argued that clients rarely, if ever, pay the headline rates charged for firms, with in-house counsel more often than not agreeing to fixed-term rates which are not prey to salary increases or changes in the market.

Tony Wales, international general counsel at internet company AOL argued that law firms had become a lot more transparent and straightforward in recent years when discussing fees with clients.

"I do not think it is particularly helpful to know how firms calculate their rates," he said. "We go to outside counsel for specialist advice; at that level I do not think that there is a huge correlation between salary hikes and any increases in fees."

Wales added that while corporates with slim profit margins like Wal-Mart would put the same pressure on law firms to hold down their rates as they applied to any other supplier, those clients turning to outside counsel for advice on high-value matters were not likely to be concerned with transparency over billing – they just want the best lawyer for the job.

However, for some general counsel, the reason behind huge rate increases is already all too clear.