Font Size:

At a time when workers in Texas are watching their paychecks shrink, Texas general counsel who are among the highest-paid executives at the state's largest corporations were not immune from the effects of the economic downturn.

2008 pay packages for 56 top legal officers at 55 large Texas companies averaged $1,760,327, down by 11.6 percent compared to 2007's average of $1,991,410 for 51 GCs at 50 Texas companies.

The decline in average Texas GC compensation in 2008 isn't surprising to Daniel Hamermesh, an economics professor at the University of Texas at Austin, who says the dip is likely due to the falloff in stock prices.

"I would expect these things to be more sensitive to the depression, as stock prices go down," says Hamermesh.

The GC pay packages nevertheless look great when compared to the $794,000 average profits per partner in 2008 at the 25 highest-grossing firms in Texas, as reported in Texas Lawyer 's Annual Report on Firm Finance. [See "Despite Economy, Ike, BigTex Revenue Rose in '08," Texas Lawyer, April 27, 2009, page 18.]

The average PPP is only 45.1 percent of the $1,779,347 the 55 general counsel earned in 2008.

This year, for the first time, Charles W. Matthews, vice president and general counsel of Exxon Mobil Corp. of Irving, heads the list of the best-paid general counsel in Texas. His pay package totaled $9,700,227 in 2008, including equity with a fair market value of $5,490,643. Previously, Matthews was not among the five highest-paid executives at Exxon Mobil, so his compensation wasn't reported in proxy statements his company filed with the U.S. Securities and Exchange Commission. Matthews did not return a telephone call seeking comment before presstime on Sept. 2.

Matthews isn't the only Texas GC with a seven-figure pay package. According to Texas Lawyer 's Corporate Roster 2009, 18 GCs racked up total pay in excess of $2 million, including the value of equity they received as a part of their compensation, and another 26 came in above the $1 million mark.

Texas Lawyer has reported on general counsel compensation in the annual Corporate Roster for the past 17 years.

For the 17th annual Corporate Roster, Texas Lawyer examined executive compensation at the 118 Texas companies on the Fortune 1,000 list. The compensation is included in financial reports companies file each year with the SEC.

In those filings, the companies report the total compensation going to their chief executive officer and chief financial officer, and to the three highest-paid executives other than the CEO and CFO. The total compensation figures include salary and bonus, but also the value of equity compensation, which can include time- and performance-based restricted stock awards and stock options. The equity is reported as a dollar value of the expense recognized for financial reporting purposes pursuant to FSAS 123R, a standard issued by the Financial Accounting Standards Board, and includes costs associated with equity awards granted in 2008 and in prior years.

The Corporate Roster consists of three charts: "Texas' Best-Paid General Counsel" lists the total compensation paid to 56 general counsel in Texas. Those are companies where the general counsel is among the five highest-paid executives. "The Second Tier" includes an estimate of compensation paid to another 36 general counsel. The third chart, "Option Exercises and Stock Vesting" reports on the best-paid general counsel who exercised stock options in 2008 or had restricted stock or units that vested during the year.

Related charts:

Texas' Best-Paid General Counsel
The Second Tier
Option Exercises and Stock Vesting
Who Represents Corporate Texas?

A few of the 118 companies do not have a general counsel on one of the charts, such as Freescale Semiconductor Holdings of Austin, which has had an acting GC since December 2008. Galveston's American National Insurance Co., and Adams Resources & Energy Inc. are among companies without a general counsel; both have longstanding relationships with firms. Insurance company United States Automobile Association of San Antonio does not file proxy statements, and Idearc Inc. of Dallas/Fort Worth Airport voluntarily filed for bankruptcy on March 31, 2009.

Also, the compensation of Edmund S. Gross, senior vice president, general counsel and secretary of CVR Energy of Sugar Land, was not included on the best-paid chart because his 2008 pay package came in at a loss of $2,199,827, because a decline in the company's stock price negatively affected the value of some long-range incentive compensation.

The pay packages for GCs at a number of other companies could not be estimated on "The Second Tier" chart because of disclosure rules. "The Second-Tier Chart" estimates GC compensation by reporting it as some amount less than the fifth-highest-paid executive as a company. The rules require companies to report compensation of their chief executive officer and chief financial officer. If either was the lowest-paid among the five executives, the GC's compensation could not be estimated because the GC's pay package could be higher than the CEO or CFO.

Those companies include Administaff Inc. of Kingwood; Dallas companies Affiliated Computer Services Inc., AT&T Corp., Comerica Inc., ENSCO International Inc., Neiman Marcus Inc., Southwest Airlines Co. and Texas Instruments Inc.; AmeriCredit Corp. and D.R. Horton Inc. of Fort Worth; Benchmark Electronics Inc. of Angleton; Dell Inc. of Round Rock; Denton-based Sally Beauty Holdings Inc.; Whole Foods Market Inc. of Austin; and EOG Resources Inc., Exterran Holdings Inc., HCC Insurance Holdings Inc., Oil States International Inc., Service Corporation International and Targa Resources Inc., all of Houston.

Frank G. McDonald, senior vice president, general counsel and assistant secretary of XTO Energy Inc. in Fort Worth, heads "The Second-Tier" chart, with a pay package estimated as less than $8,276,291, including equity valued at $6,428,155 in 2008. Last year, Exxon Mobil's Matthews was at the top of "The Second-Tier" chart.

Subscribe to Texas Lawyer