Thinking About Moving In-House? Everything You Need To Know About General Counsel Compensation

Ed. note: This is the latest installment in a series of posts from Mainspring Legal’s team of expert contributors. Michael Allen is the CEO of Lateral Link. He is based in the Los Angeles office and focuses exclusively on Partner and General Counsel placements for top firms and companies. Prior to founding Lateral Link in 2006, he worked as an attorney at both Gibson, Dunn & Crutcher LLP and Irell & Manella LLP. Michael graduated summa cum laude from the University of California, San Diego before earning his JD, cum laude, from Harvard Law School.

For those who think closed partner compensation is difficult to discern, you may want to check out the compensation model for General Counsel. It’s more akin to a supermassive black hole between a slew of stock options, bonuses, base salaries, non-equity incentive compensation and more. The truth is General Counsel compensation is very much what you make it (good and bad), as the flexible parameters allow you to negotiate a compensation package (either against yourself or up in the food chain).

In contrast, the law firm model is very much tied to hours billed and work generated. Having your pay tied to your company’s performance sounds risky – and it certainly can be – but these risks can be mitigated by choosing your landing spot wisely.

Twenty percent (20%) of top paid Fortune 1000 General Counsel received bonuses at an average payout of $650,000. Interestingly, these bonuses had a nearly perfect correlation to company revenue. For those who are familiar with General Counsel compensation structure, this is unsurprising, given that bonuses usually reflect a percentage of the company’s revenue. Non-equity compensation weakly to moderately correlated with revenue, which all other metrics were weakly correlated with a company’s revenue. The bottom line is that revenue rarely dictates how much you are going to make – which is why it is crucial to have an informed and skillful negotiator help broker your compensation package.

Of the 340 Fortune 1000 General Counsels whose salary information is available, around 85% receive at least some compensation in the form of stocks. For these attorneys, the average cash they received last year (the sum total of their bonuses, salary and non-equity incentive compensation) was $2.7 million. The average stock and options awards were a little under half of that at $1.25 million.

Having a significant percentage of your take home tied to company performance can be risky, however if you are well-connected enough to land at a blue chip company, like many of the Fortune 1000 companies, the risk of long-term losses from stock crashes while not non-existent, is relatively low.

While not a perfect index, the calendar one year gains for the S&P is a robust 15.8%. Over the past ten years, only two years have been in the red – albeit disastrously so. The risk is still there, the rewards however, can be enticing.

Gregg Winiarski of IAC-InterActiveCorp, an American holding company that owns Match Group (Tinder, Match.com), Vimeo, The Daily Beast and more, has over $26 million to realize on exercise of IAC’s stocks. However, the gains and losses at many of these large Fortune 1000 companies are often modest year to year, but this stability is often inviting when compared to the business model of the tech industry. [See who rounded out the top 20 earning GC’s on our blog]

The roots of the invasive blobitecture spreading across Silicon Valley sit on a thick layer of false starts and runaway cash burns. Many have come and many will go, but it can be hard to resist the lure of potentially massive payouts from vested stocks. For every ounce of gold there is a tonne of pyrite; according to a Harvard Business School study, 75% of venture backed startups will go bankrupt.

Nonetheless, many startups are enticing attorneys with vaporeware and braggadocious business plans, leaving them with thousands of shares of worthless stock and no launching pad to leap to a new job from.

Going in-house can be a great career move, provided you are armed with market knowledge and guidance. The paradigm of losing money after exiting Biglaw is shifting from fact to fiction. Many of the top paid attorneys in the world are now General Counsel at corporations. As more companies spring up everyday with a voracious appetite for legal counsel, pay rates are rising in tandem. The tricky part is finding a stable and prosperous landing ground.

We are currently working on numerous searches for General Counsel positions including one at a sizeable hedge fund in Los Angeles that is seeking at least ten years of relevant experience. Feel free to reach out to me or our team at Lateral Link for more information about positions or even just salary negotiations.

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