Despite recent reports of sky-high pay packets received by a few leading in-house lawyers, GCs believe they are not paid enough. Alex Newman reports

In-house lawyers believe general counsel at leading companies remain underpaid compared to other senior executives despite recent publicity over the high levels of pay received by some GCs in the banking sector, according to Legal Week's latest Big Question survey. 

Of the 133 respondents to the survey, 42% think in-house lawyers are 'slightly underpaid', while 19% called the gap between lawyers' pay and other roles of a comparable level in the company 'substantial'. Just 7.5% of the respondents feel lawyers were overpaid compared with other senior company roles, while 31.5% say pay is about right.

"Over the last 20 or so years, in-house legal work has diverged significantly from private practice, and become more demanding and intense," comments one lawyer who answered the survey. "Yet GCs often struggle to articulate the value they add to a company, and to earn commensurate rewards."

This is not to say large corporates' most senior lawyers can't earn substantial salaries that are comparable with the pay of other board members.

Earlier this year, documents seen by Legal Week showed the £475,000 basic salary paid to Co-operative Group GC Alistair Asher was considered by the mutual to be at the top end for board members at listed UK companies. And yet a senior pay review had suggested bumping the head lawyer's total target remuneration to £1.2m, comprising a £550,000 base salary, a £550,000 bonus and other fixed allowances.

Including share schemes, the Co-op suggested a GC at a FTSE 30 company could earn as much as £1.4m. However, in March Barclays said it had given newly installed GC Bob Hoyt £700,000 in shares after just four months in the job. On an annualised basis, the award would put Hoyt's share package at more than £2m, excluding basic salary and other bonuses. 

"When you get to the top echelons, you are fishing in quite a small pool of people who can handle the role and accept responsibility and accountability for such large organisations," says Candace Kendall, a consultant who has worked as an in-house lawyer at Motorola and Skandia, and in private practice at DLA Piper. "It's fair enough that these lawyers are paid at board levels."

Money give take

Rewarding performance

Share purchase schemes and awards are common across in-house legal teams and the survey found strong support for GCs to receive bonuses, with 80% of the respondents arguing that such packages should be standard.

However, there is less consensus over the notion that GCs should have large discretionary elements to their pay, with just 28% agreeing with the statement that 'if GCs work in institutions that award large bonuses why shouldn't they be eligible too?'

Asked how bonus schemes for in-house lawyers should be structured, 53% of respondents say they should be tied to company performance as opposed to reflecting team performance. But nearly one-in-three of the respondents (30.5%) take the opposite view, arguing that team performance should 

be taken into account, while 22% feel bonuses should be tied to success rates, for example on litigation. There is much less support for GC reward packages focusing on cost savings (4%) or time billed (4.5%). 

"I agree with the idea of bonuses for in-house lawyers, and I think the GC role is at a level of seniority that should be closely tied to company performance," says Peter Sloan, deputy GC at Tullow Oil.

However, Carl Liederman, who recently stepped down as the CEO and GC at the not-for-profit organisation One Young World, cautions: "If an in-house lawyer's pay is linked to a bonus, I think there could be some concern, particularly if there are targets for revenue generation. Success fees on litigation make a bit more sense, but one of the most important functions of a GC can be to slow things down, and act as a detached voice of reason in deal-making."

In-house v private practice

When it comes to measuring pay against private practice peers, 51% of respondents say top in-house lawyers should be paid as much as partners in law firms. However, only 5% think GC pay should exceed that of private practice lawyers, with 26% and 17% arguing the amount should be 'slightly' or 'substantially' less, respectively. 

"Ten years ago, company lawyers were more likely to look at private practice with envy, but that's changed; there's definitely a narrowing of the gap," says Liederman. "At a big multinational, particularly if your mandate includes M&A, you will be well remunerated, probably at mid-Atlantic firm partner levels."

But he adds that this generosity does not extend to all companies, even in the highly paid financial sector. "In-house counsel at mid-market private equity and hedge funds are more likely to voice worries about pay," he explains. "This may be because a large part of their role is taken up with compliance-related matters, or simply because they are responsible for smaller teams, acting as purchasers of external legal services rather than doing the work themselves."

For Sloan there should be some parity between private practice and in-house salaries, "although the notion of GCs matching magic or silver circle equity shares is never going to happen realistically".

This view is backed up by the survey, with just 1% of the respondents citing pay as the biggest driver for lawyers to move in-house from private practice, and a further 10.5% selecting either 'better opportunities' (6%) or 'more chance for progression' (4.5%).

Instead, respondents identify the nature of the in-house role as its main attraction, with just over half citing work/life balance (52.5%) as the main reason for moving, and a further 25.5% suggesting a greater variation in the role is key.

"The modern GC is much more valuable than the average private practice partner," says one respondent. "In-house lawyers have to perform at the same level as partners but take responsibility for a much wider range of legal topics rather than being specialists in one area."