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Deval L. Patrick must have given up a lot to become general counsel at The Coca-Cola Co. In order to compensate him for the hit he took in leaving his prior post as GC at Texaco, Coke gave him stock options valued at $19.4 million. And a decade’s credit in its retirement plan. And a $1 million “make whole” payment — he got half last year, and the other half this year. Between salary of $359,583, bonuses of $495,000 on top of the make-whole payment and about $9 million in restricted stock, Patrick’s total compensation for his first year on the job at Coke was $10.35 million. That pay package not only has the potential to make the top-paid King & Spalding partner feel like an underachiever, it also makes Patrick the highest-paid lawyer in Fulton County Daily Report‘s ranking of general counsel compensation. In second place is Frank L. Fernandez, The Home Depot Inc.’s general counsel, who in his first year on the job earned $6.15 million. John C. Walters, general counsel of John H. Harland Co., is a distant third with pay of $1.45 million, despite the fact that he’s the only one of the top three with a track record with his company. The Daily Report examined the pay of 33 GCs at public companies based in Georgia. Those GCs emerged because they are among their companies’ five most highly paid executives, which means their compensation must be listed in public documents filed with the Securities and Exchange Commission. Conceivably, GCs who aren’t among the top five at their companies, or who work for private concerns, make as much or more than the GCs listed here. MEDIAN PAY PACKAGE: $433,411 The list includes 29 men and four women. The highest-paid woman in the ranking is Cathy Sigalas, general counsel at World Airways, whose total compensation was $603,790. Median total compensation for the group was $433,411; average salary was $256,343 and average bonus was $167,874. Though these pay packages show that GCs are worth a lot to their corporations, there’s little to show how compensation committees decide their value. Corporate spokespeople are reluctant to offer much insight beyond what’s tucked away in their proxies. Proxies, once pay information has been teased out of their Gordian knot of charts and footnotes, offer only the most basic information about how executives are valued. For example, Home Depot’s 2002 proxy says, in part, “We have a pay for performance philosophy.” Now that’s illuminating. So how, exactly, are GCs valued? Sure, their pay is based partly on performance. But compensation and placement consultants say it also turns on what a GC gave up to take the job — remember Coke’s Patrick — and on what the competition is paying. KEEPING UP WITH THE JONESES One prime factor used in setting a GC’s compensation is keeping up with the Joneses. Eric C. Larr�, executive compensation practice leader for the Southeast region for Towers Perrin, advises corporations to look at what peers in their industry or companies with similar revenue are paying their GCs. “When you’re looking at hiring somebody, you’re going to generally look at the market data. … You pay the position, not the individual,” Larr� said. The rationale: In general, GCs who aren’t trying to move into some highly specialized or regulated industry, such as biotechnology, can switch industries with ease. Patrick is an example of that, having moved from oil and gas company Texaco to beverage giant Coke. Larr� said that although an individual’s prior experience may support an adjustment to the market data, what competitors are paying remains the bedrock of compensation setting. “The war for talent is alive and well,” said Deborah A. Sawyer, managing director of professional and information technology services for Korn Ferry International. “You have to realize that corporations spend an incredible amount of money each year with compensation consultants to look at ‘How are we doing vis-a-vis our peer companies?’” Sawyer, whose company represents corporations in executive talent searches, said that in the last year, she’s seen the pay of top managers below the CEO start to standardize. In other words, the GC’s base salary might be almost the same as the CFO’s. Because their pay is public information, she said, “It eliminates some jealousy and curiosity.” The big pay differential, then, comes from bonuses that are based on executives’ function and performance, she said. FUNCTION COUNTS As the GC’s function has changed in recent years, so has the pay. A few decades ago, conventional wisdom said that lawyers who wouldn’t or couldn’t stand the rigors of partnership took less-demanding jobs in-house, giving complex work to outside counsel. Over the last 10 years, according to Sawyer, the GC has become the CEO’s right hand “and not just a necessary evil.” She said that in Korn Ferry’s general counsel searches, the company is finding that GCs are increasingly viewed as strategic business partners to the CEO and senior line executives, as well as senior advisers on the board. As such, a GC is expected to marry a level of business savvy and skill to technical legal competence. Sawyer said highly paid GCs are worth their pay if they are functioning in that business advisory role. “If they’re helping to mitigate risk, if they’re looking at everything from the SEC aspect to mergers and acquisitions and doing it from a cost management standpoint, then they are earning their keep,” she said. PERFORMANCE STILL MATTERS Walters, at John H. Harland Co., is the only GC in this ranking’s top three most-highly compensated who has a track record at his current employer. Walters joined Harland in 1996, and has been among the company’s five highest-paid individuals since day one. His background may have helped him achieve that status. Before joining Harland, he served as executive vice president and deputy GC at First Financial Management Corp., where he worked with Robert J. Amman. Amman later became CEO of Harland and hired Walters for his new company. Amman no longer is with Harland. Working with Amman at First Financial subsidiary Western Union Corp., Walters helped change Western Union from a money-losing telecommunications business to a profitable financial services company. Harland, known for its check and forms printing business, in recent years has transformed itself into a technology company that provides software designed for financial institutions. Walters has been among the company’s leaders throughout that transition. His base salary his first year with Harland was $215,417. He also received stock options for 100,000 shares, valued at the time at $731,250. Last year, his base salary had climbed about 24 percent from his first-year’s pay (that’s 4 percent per year) to $266,500, and he received a $123,123 bonus. His total compensation, which includes stock ownership, was close to $1.5 million. What’s happened at Harland in the intervening five years to justify an additional half-million? Since Walters has been at Harland, the company’s share prices have zigzagged, going from $33 a share at the end of 1996 to a low of just under $13 in 2000 to $25.10 last week. But Harland was a top performer in the Atlanta Journal-Constitution‘s 2002 ranking of Georgia’s most profitable companies, taking eighth place on the list of 100, thanks to its 36 percent profit growth in 2001. PAY NOT ALWAYS A BAROMETER But pay doesn’t always rise with company triumphs and fall with company troubles. Patrick G. Jones, general counsel at PTEK Holdings Inc., ranked fourth in compensation with a 2001 pay package of $1.35 million. Salary accounted for $393,750 of that. His bonus accounted for another $515,227, and restricted stock worth $430,853 made up most of the rest. Jones has been with PTEK (previously known as Premiere Technologies) since 1995, the year before it went public. In his first full year with the company, 1996, his base pay was $150,000 and he exercised stock options worth $528,338. His pre-PTEK experience included partnerships at Nelson Mullins Riley & Scarborough and Long Aldridge & Norman (now McKenna, Long & Aldridge). According to PTEK’s proxy, the company’s compensation committee sets executive pay according to a number of factors, including the level and scope of responsibilities, pay levels of executives at comparable companies, and PTEK’s recent financial results as compared to prior years and its business plan. The company hasn’t had stellar financial results. PTEK lost $242 million last year — though it had a $5 million profit from continuing operations in the first half of 2002. Its stock did rebound somewhat in 2001 — from $1.38 a share to $3.40 a share — but it traded at a high of about $47 in 1996. Though Jones’ compensation package is large, it doesn’t contain some of the perks given to others at his company. PTEK CEO Boland Jones’ (no relation to Patrick Jones) 2001 compensation included $6 million in loan forgiveness, for example. Jeffrey A. Allred, a lawyer who is the company’s president, chief operating officer and director, had $3 million in loan forgiveness. As a possible factor supporting Patrick Jones’ pay, Korn Ferry’s Sawyer pointed out that PTEK “was on a strong acquisition binge, and they did what they said they were going to do.” R. David Simmons, Southeast executive compensation practice leader at Watson Wyatt & Co., said, speaking generally and not about PTEK in particular, when a company’s performance is poor but it’s GC’s pay is rich, several things could be happening. “The conclusion of the board might be that the work of what they presume to be a vital individual in a period of extreme defensive activity, and the desire to hold onto that individual, means they need to take care of that person,” he said. “Or the person might have lost so much value in options that they don’t want to do an option repricing, so they make a cash payment through the bonus to recognize [the person's] activities and efforts.” On the other hand, Simmons added that when pay seems to outstrip performance, “Healthy skepticism is always wise.” MAKING THEM WHOLE The two highest-paid GCs in this ranking had barely a year to build performance records with their employing companies before the most recent proxies came out. But both Coke’s Patrick and Home Depot’s Fernandez — each of whom joined their respective employers in April 2001 — had impressive, guaranteed pay packages before they even started working. Pay packages like those, Korn Ferry’s Sawyer said, often are based on what GCs had to give up to join their current employers. For Patrick, the sacrifices must have been substantial, as the sum of the “make whole” pay and stock options the company offered him is close to $20 million. Most of that is to reimburse him for stock options he left behind at Texaco. Patrick wasn’t among Texaco’s five highest-paid executives, so his compensation from his time there isn’t public information. NO TREND-LINE ON PAY

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