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Corporate Counsel‘s most comprehensive GC Salary Survey ever shows that many general counsel continue to bet heavily on the stock market. While GC cash compensation at major companies continues to rise, equity as a percentage of their compensation packages is going up at a much faster rate. And because this has been going on for a while now, the players are racking up huge numbers in stock options. Time Warner Inc.’s recently retired Peter Haje has the most chips on the table, with $82.6 million in exercisable options. Behind him are such notables as Cendant Corporation’s James Buckman, who is sitting on exercisable options valued at $49.4 million. Counting cash compensation alone (salary plus bonus), the highest-paid is the sole investment banking executive on our list. No surprise there; the financial industry usually pays top dollar. In that tradition, The Bear Stearns Companies, Inc.’s Mark Lehman received an envy-inducing $2.5 million bonus in 1999, on top of $1.9 million in restricted stock grants and $200,000 in salary. What is notable, though, is how GCs in other industries are making a habit of living by Wall Street’s gambling ways. The push in this direction comes both from the GCs and from the companies, say compensation consultants and legal recruiters. GCs are very aware that, while the market remains high, the real wealth is in equity. And companies — increasingly treating GCs like other most-valued executives — keep tying these top legal officers closer to the corporation’s success with such short-term incentives as bonuses and such long-term inducements as stock options. In 1993, 14 of the GCs on our list got no bonus. This year, all of the top 100 on our list pocketed a year-end bonus. And while median salary has gone up 92 percent since 1993 (from $228,000 to $437,500), median bonus has increased by 123 percent (from $185,000 to $412,500). Meanwhile, on the stock option front: In 1996 the median value of options granted to the 100 highest-paid GCs was $692,592 — more than twice that year’s median salary for the same group ($319,833). On this year’s list, which reports 1999 compensation, the median salary among the top 100 is $437,500, a respectable increase of 37 percent. But the median value of options jumped higher; up by 46 percent, to $1,010,331. The number of GCs getting options has held steady at about 85 of the 100 during this period. What keeps expanding is the GC’s importance within Corporate America. This is clearly demonstrated by the growing number of chief legal officers who are among the best paid at their companies. In 1995 only 260 of the top 1,000 publicly traded companies counted their GCs among their five most highly compensated employees. This year it’s up to about 320. Legal recruiters have been seeing stock options rise in importance during the last five to eight years. “There’s no question that these valuable options keep strategic people in their positions,” says Susan Sneider, a consultant with Chicago-based law firm consultancy Hildebrandt International. What’s new, she says, is that general counsel are now viewed as being among the few critical people companies must keep. Yet legal executives have become more mobile, at least in part because of high-visibility fortunes made at Internet startups, says Paul Richardson, managing director of the Stamford, Conn., office of executive recruiter Korn/Ferry International. In-housers historically tended to stay in one organization for a long time, but as they have become more open to moving, they’ve also become much savvier about compensation. They are increasingly aware of what colleagues make and are more likely to demand equity. “In any kind of move to a new organization, where they leave behind options that haven’t vested yet, they’re looking for those to be replaced,” Richardson notes. Other studies confirm that salary’s place in compensation packages is shrinking. A survey conducted in January by compensation consultants Pearl Meyer & Partners found that in 1999 salary amounted to just 21 percent of the average general counsel’s income package, down from 31 percent two years earlier. The study, which was based on a sample of 55 companies, also found that stock options represented 49 percent of top legal officers’ income, up from 43 percent in 1998. A few caveats: Our list does not include general counsel at privately held companies — some of whom, as Bear Stearns’s Lehman pointedly noted, certainly make more than those exposed by the proxy statements from which we cull our information. (The Securities and Exchange Commission requires publicly held companies to reveal the compensation packages of their five highest paid.) And even though all those on our list are the chief legal officers within their companies, some also have additional titles and responsibilities, which means that comparisons are not entirely apples to apples. That said, pay is going up for GCs at large companies, just as it is for other key posts reporting directly to the chief executive officer. “GC compensation has crept up in parity with chief financial officers,” reports Richardson. Indeed, cash compensation (salary plus bonus) at the very top of Corporate Counsel‘s list rose significantly in the last year. Those in the top 10 spots took home, on average, 10 percent more in cash compensation than their counterparts the previous year. This comparison is not entirely direct, because the occupants of spots one through 10 are different from last year’s. Only six of last year’s top 10 reappeared, and none of them landed in precisely the same spot. Clearly life at the top is precarious. But the good news is that there’s been significant upward mobility as well: CBS Corporation’s Louis Briskman, for instance, vaulted from number 38 to number five. And Richardson says that corporations seem very willing to come up with competitive packages: “Our clients are quite amenable to structuring the right compensation scheme to attract the right person.” This rosy picture, however, seems confined to the elite. Legal recruiters, who tend to handle searches for smaller companies’ GCs, as well as searches for lower-level in-house positions, say they see corporations having trouble keeping pace with astronomical paychecks at the megafirms. Valerie Fontaine, a principal at Los Angeles-based legal recruiter Selzer Fontaine Beckwith, says noncompetitive pay has prolonged some of their searches for in-housers. With legal department salaries tied into company-wide pay schemes, it’s difficult for many companies to come up with competitive packages. “They are not going to accommodate a onetime surge in a specific industry, because it throws off the entire compensation structure,” says Hildebrandt’s Susan Sneider. Ann Israel, president of the National Association of Legal Search Consultants and a New York-based recruiter, says she is seeing more offers turned down because of noncompetitive salaries and believes that the applicant pool has shrunk as a result. Although she normally fills a job within six weeks, Israel says that in August she was still working to fill a “wonderful” job that came open in March. The first candidate offered the post couldn’t walk away from a forthcoming bonus at his firm; the second candidate went with a “once-in-a-lifetime” offer at a new-media company. Israel says she feels Cassandra-like, having watched the dot-com frenzy building and lawyers jump ship from more traditional jobs to chase fortunes. “I’ve been warning the corporations for several years now that this was coming,” she says. Israel thinks corporations will have to respond with more perks. For GCs, she says, “those golden handcuffs are going to get a little bit shinier.” Keeping compensation competitive is even tougher at lower levels, she says, which may well mean more options all around.

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