I worked for twenty years at the darkest of the black-box compensation law firms: No one knew what anyone else was being paid, and the firm forbade talking about compensation. Here’s the curious part: We obeyed.
I saw the raised eyebrows of partners considering moving laterally to my firm: “Right — no one talks about compensation. You guys must talk about it all the time, just like we do at my firm. It can’t be a secret.”
Wrong. We really, honest-to-God did not talk about compensation. The subject just didn’t come up.
I’ve heard second-hand that this is true for other black-box firms, too. The managing partner of a different large, black-box comp firm recently told one of my colleagues: “Once you take compensation out of the limelight and forbid people from talking about it, then people stop talking about it. The subject drops off the table.”
That sets the stage: At firms where lawyers are permitted to talk about each other’s compensation, they do. And at firms where lawyers are prohibited from talking about compensation, they don’t.
Riddle me this: In corporate law departments, we are not prohibited from discussing each other’s compensation, but we don’t do it anyway. Why is that?
I raised this subject with several of my colleagues recently. (You could see that look in their eyes: “Help me, Lord. Herrmann’s got some silly blog post in mind, and he’s pestering me with this nonsense. I guess I should placate the fool, so he doesn’t get violent.”)
Here’s what we thought:
It’s important to frame the issue correctly. Some in-house lawyers do complain about compensation generally: “We get paid too little.” But, in our collective experience, in-house lawyers don’t complain about comparative compensation: “Smith, Jones, and I all hold jobs of equal importance and report to the same person. But Smith gets paid more than Jones and me. That’s an outrage!”
(The law firm equivalent would be this: Everyone might complain that the partners at Wachtell Lipton and Quinn Emanuel are being paid a king’s ransom, and for some reason our firm can’t break out of the lower rungs of profitability. But that’s very different from complaining about comparative compensation within a partnership: “Smith isn’t half the lawyer I am. He doesn’t bring in any business, and he doesn’t work very hard. Why’s that bum being paid more than I am?”)
Why don’t in-house lawyers complain about comparative comp? My colleagues and I could do no more than speculate: Perhaps there are fewer people to whom to complain in-house than there are at law firms. In-house, you wouldn’t naturally be complaining to the person who sets your compensation. (You might discuss your comp with that person once a year, but you wouldn’t naturally raise the topic over lunch.) And you wouldn’t naturally be discussing comp with the folks whose comp you set (again, except for the mandatory annual discussions). So the only people to whom you could gripe are those situated similarly to you in the corporation, which is likely to be a very small crowd.
At a law firm, all of the partners are supposedly equal. That provides a big audience for kvetchers. At a corporation, there are few people to whom you could complain, so that may limit the conversations.
Partners’ purported equality may also aggravate the problem. In-house, it’s really no surprise that the General Counsel is paid more than the Deputy General Counsel, who’s paid more than the Assistant General Counsel. The hierarchy is obvious. But partnerships are different; they permit easy self-delusion. Every newly-minted partner can sit in his new, larger and fancier, office thinking, “Ah! I made it! Now I truly count at this establishment!” And he realizes only ten years later that he didn’t actually count at all. Even among those who are not self-delusional, any partner who thinks he shot the lights out this year is positioned to complain about his comp compared to any other partner.
My colleagues had a few other thoughts, too: Maybe law firm profits feel more like a zero-sum game than corporate salaries do, and that prompts competition. Maybe lawyers at firms are revenue-generators, while in-house lawyers are part of a cost center, and the revenue-generators are more likely (or more able) to gripe. Maybe in-house lawyers are, as a group, less cutthroat than lawyers at firms, so they’re just naturally less prone to complain, or maybe they resigned themselves to relatively flat compensation expectations when they moved in-house.
Maybe the nature of annual salary adjustments in corporations affects how people perceive compensation: Corporate salaries tend to increase relatively little each year, and people are more concerned with bonuses and the value of corporate stock. That makes comparisons of base pay less relevant. Even as to base pay, in-house lawyers realize that they each joined the corporation to perform a different role, and the lawyers had different bargaining power when they first arrived, so it’s not surprising that base pay would have varied at the start and not equalized over time.
Maybe law firms historically paid associates (and, in many firms, partners) in lockstep, so lawyers became accustomed to thinking that they all had equal value. Now that those times have changed, perhaps lawyers are offended by the inequality of the brave new world they’ve entered.
Maybe my in-house colleagues and I are just polite, so we don’t talk about money, because the subject is uncouth. Or maybe people are complaining about comparative compensation all the time, and my colleagues and I are just hopelessly out of the loop.
I don’t have an answer. (Indeed, a fair reader of this column might legitimately say that I haven’t even framed a question.) But perhaps you can help: Do lawyers at your corporation complain about their compensation compared to the compensation of their peers within the company? Or are law firm partnerships uniquely vicious in that regard? If so, why?
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 (affiliate link) and Inside Straight: Advice About Lawyering, In-House And Out, That Only The Internet Could Provide. You can reach him by email at [email protected].