Ed. note: This is the latest installment of Inside Straight, Above the Law’s new column for in-house counsel, written by Mark Herrmann.

This just in: Corporations have matched the Cravath bonus scale!

Correction: The preceding sentence is not just false, but unintelligible.

Several folks have told me that a good way to juice readership of this column would be to publish a salacious post about bonuses paid to in-house corporate counsel, so readers could complain about how one corporation is stingy and another generous, or how corporations pay bigger or smaller bonuses than law firms. But I can’t write that post.

Why not?

First, I’m ignorant. I really don’t know very much about this topic, and I’m really not that interested. Even if I knew a lot, I’m old-fashioned on this topic, so I wouldn’t be inclined to blab about people’s compensation on a blog.

It gets worse. Even if I were knowledgeable and inclined, I still couldn’t write a decent post about in-house compensation, because the data aren’t available. Corporations don’t send out bonus tables based on years of employment, and many bonus decisions are confidential. So it’s essentially impossible to say anything about bonuses paid to in-house counsel that would be meaningful across (or even within) corporations. The most salacious statistics that I’ve managed to find on-line (and I didn’t really look that hard) about bonuses for in-house corporate lawyers come from Vivia Chen over at The Careerist:

According to Corporate Counsel, ‘the 2010 average base salary across all levels of in-house lawyers was $174,000.’ But before you big firm lawyers get all snotty, it’s worth noting that in-house lawyers got an average cash bonus of $57,000. And the very top — meaning chief legal officers/general counsel — ‘took home average bonuses of $539,000,’ reports CC. (The average total cash compensation for CLO and GC exceeded $1 million. See Corporate Counsel’s 2010 GC Compensation Survey.)

I suppose that’s salacious, because it includes salary information, but don’t get yourself too worked up. When you talk about base salary of all levels of in-house lawyers, you’ve cut an awfully broad swath, from folks right out of law school to the general counsel of the country’s largest corporation. This would be like talking about the average pay of a lawyer at a law firm, without differentiating between first-year associates and the global managing partner. (Or Warren Buffett walking into a bar, so the average net worth of folks in the bar is $3 billion each.) Even if that number is accurate, it doesn’t mean very much.

There’s another reason why information about corporate bonuses doesn’t compare easily to bonuses at law firms. In-house lawyers typically receive a base salary, which is often below what a comparable lawyer could earn at a law firm. The lawyer will also be assigned to a bonus tier, and the target bonus may be a big chunk of the lawyer’s cash compensation. To cover for my own ignorance here, I’m relying on a recent post at Law Shucks, which explains that “cash bonuses tend to start at 10% [of base salary] and run higher with seniority. Bonuses in the range of 25-35% of base aren’t uncommon, and depending on how the employer does they can run much higher.”

But those bonuses are not set in stone. Individual lawyers can receive more, or less, than the target bonus depending on other factors. Those factors vary by corporation, but they may include corporate performance in the year, law department performance in the year, and individual performance.

Finally, some in-house lawyers have a third piece of compensation. Again, from Law Shucks: “Senior lawyers get some sort of equity compensation (stock options, SARs, phantom stock, whatever), and those grants are almost always more than 10% of base. So after three, four or five years, depending on vesting, bonus season is when those grants start rolling in (and they’re usually taxable at a lower, long-term rate).”

That equity compensation may be used to encourage in-house lawyers not to change jobs. Equity compensation may vest only over time (in, say, the lawyer’s second through fifth years of employment), and the tax advantages of holding appreciated stock may also improve over time. The combined effect is that compensation ties an in-house lawyer to his or her employer.

I’m afraid my post was ultimately more boring than salacious. But maybe it performs a public service by educating folks interested in moving in-house about the nature of in-house compensation. That subject is often a brave new world to people who have worked only at law firms.

Earlier: Prior installments of Inside Straight


Mark Herrmann is the Vice President and Chief Counsel – Litigation at Aon, the world’s leading provider of risk management services, insurance and reinsurance brokerage, and human capital and management consulting. He is the author of The Curmudgeon’s Guide to Practicing Law.

You can reach him by email at inhouse@abovethelaw.com.


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