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The 2003 GC Compensation Survey by Corporate Counsel magazine found that compensation for the 100 best-paid general counsel grew by 9 percent last year. But what about everyone else? While pay for chief legal officers is typically set by board compensation committees, salaries for most in-house lawyers are governed by corporate compensation programs. And the unpleasant reality is that most of these plans significantly underpay legal professionals. While it’s obvious that businesses have to pay competitively to attract and retain the legal talent they need, it is a lot less clear how general counsel can successfully argue for more money on behalf of their staff. Doing so requires two basic steps. First, GCs have to understand the lawyer market and why company salary systems so often shortchange lawyers on staff. Second, general counsel have to understand legal compensation surveys and how to use them. In-house lawyers are a bit like a few ants toiling inside a beehive. The businesspeople — the proverbial bees — produce the revenue, provide the profits, and constitute the majority of the staff. It’s natural, then, that companywide salary plans are designed around them. Every corporation, however, has service employees (accountants, human resources professionals, lawyers). Because their contributions do not directly result in profits, their compensation must be determined with a different yardstick. The solution, typically, is to set pay for most service employees according to local compensation markets. But setting appropriate pay for lawyers is not so simple. For one thing, the market for lawyers is a national one. The type of industry in which a lawyer works can also affect compensation levels. Furthermore, law departments compete not only with other companies for their legal talent but also with private law firms. SUPPLY AND DEMAND A GC trying to ensure that compensation is competitive for his or her lawyers — or even for himself or herself — needs to bear the following in mind: Accurately setting compensation requires an understanding of whether it is currently a buyer’s market or a seller’s. The demand for high-quality lawyers with significant experience is greater than ever. With clients less willing to pay for the work of inexperienced lawyers, more assignments go to those who are more highly paid and more efficient. Increased demand for these lawyers pushes their salaries up. Most in-house departments do not hire entry-level lawyers. The competition for experienced lawyers thus hits in-house departments even harder than law firms. Lawyers are mobile, and the labor market for legal professionals is truly national (and, for some companies, international). This expansion of the market has introduced more competition and, therefore, higher salaries. In-house lawyers are often compensated at different levels for different legal specialties. That is, the market has been made more competitive by the introduction of specialty-based factors. Because specialization and sophistication of practice areas have increased in-house, law departments must now pay some lawyers more than others. SLICING AND DICING The other key to attracting and holding on to legal talent is mastering salary surveys. Winning approval for market-competitive pay for lawyers not only requires understanding these surveys, but also ensuring that the HR department at your company uses them to set lawyer compensation, too. Good legal-specific compensation surveys are done every year by several consulting groups, including Altman Weil Inc. and PricewaterhouseCoopers. Because law departments compete with firms for legal talent, GCs should also get their hands on law firm compensation data. Legal Times affiliate The American Lawyer magazine publishes such data, and so does Altman Weil, among others. A good salary survey will slice and dice data in several helpful ways. For example, lawyer compensation information is sorted by geographic location, size of company (measured by both revenues and number of employees), size of law department, years of experience, legal specialty, and more. There will be no single data point or table that reveals where compensation at your company should be pegged. Instead, general counsel and HR managers should review and consider all the relevant data and figure out a range. Pay particular attention to tables that address industry, department size, and legal specialty. Bear in mind, too, that surveys typically lag behind the market. Data is usually at least a few months old, due to the time it takes to collect and publish it. Thus, pay that’s on par with a survey still may not be competitive. Finally, remember that while the purely quantitative nature of compensation surveys is their strength, qualitative measures of your own staff should not be ignored. General counsel should take into account the experience and caliber of their lawyers. For example, if your department’s lawyers are qualitatively better than most found in-house, or if the strategic value of the legal work done in your department exceeds the norm, survey data will underestimate appropriate pay. James Wilber is a principal in the Milwaukee office of the legal management consulting firm Altman Weil Inc.

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