Our list of the nation’s best-paid general counsel features a lot of perennial names. But this year, we have a surprise addition, coming in at a lofty No. 5: John Finley, chief legal officer of New York-based Blackstone Group. Welcome, Mr. Finley, to this, the 2014 edition of our signature GC Compensation Survey.

Finley’s banner compensation year came together largely because of his bonus, the highest in the survey at $4,212,555. In Blackstone’s public filings, Finley received this turbocharged boost in part because he performed well in his traditional role as the head of legal. But the proxy filings (from which we get our data) also credited him for “positioning the firm to be compliant with the regulatory bodies,” as well as the more fuzzy “role in strategic initiatives.”

Go to the head of the class (almost): John Finley of Blackstone is 
a first-timer who debuted in the top 10.

Like many of his legal chief counterparts, it appears that Finley is getting rewarded not just because he’s a lawyer, but for his expanding function as both a company regulatory watchdog and a strategic partner for the C-suite. “They [general counsel] are expected to have the full spectrum of understanding of the business and they may give advice—give guidance through a legal lens—but they’re really there as a business partner,” says Nancy Jessen, managing director at Huron Legal, part of Chicago-based Huron Consulting Group Inc.

Although most general counsel didn’t rise through the ranks of our survey as quickly as Finley did, it’s clear that last year’s significant gains in GC pay were no fluke. It was another lucrative year for the chief legal officers on our list, and a confirmation that after relatively tough times earlier in the decade, happy paydays are indeed here again. ALM Legal Intelligence’s evaluation of publicly disclosed pay packages for the 100 best-compensated general counsel in 2013 shows that salary and bonuses are going up, and equity awards, while experiencing a very slight dip this year, are still more popular than options. (ALI is a Corporate Counsel affiliate, with which we conduct surveys throughout the year.)

Cash King: The cash compensation winner for the second year in a row is General Electric’s Brackett Denniston III, who took home $5,827,000. (But that was less than the previous year.)

Back to the regulars. One of them, who was featured on this magazine’s cover last year, is Brackett Denniston III, general counsel of Fairfield, Conn.-based General Electric Co. The reigning compensation champion in last year’s survey, Denniston, who has been on the job since 2004, topped the list again with a total cash take-home pay of $5,827,000. Gary Lynch of Charlotte-based Bank of America Corp. was the runner-up, making $5,456,840 in cash, followed by Gerson Zweifach, who has been doing double duty as general counsel of both News Corp. and Twenty-First Century Fox Inc. after they split in 2013. The spinoff evidently was a good thing for Zweifach: he carted home $5,250,000 in cash from his Twenty-First Century Fox gig (information about his News Corp. compensation wasn’t publicly available).

News Corp.’s Gerson Zweifach led in salaries, pulling $3,000,000 in base pay from one of his two GC jobs.

Five million dollars-plus is a healthy chunk of change for anyone. But it doesn’t come in one big block. Let’s break those compensation packages down into their component parts. The general counsel on the list are ranked on the total cash they took home last year, a number that combines base salary plus bonus and nonequity compensation, but does not include stock awards or options. Historically, base salaries tend to be the most stable piece of the compensation pie, but for the past two years these numbers have grown significantly. Last year saw a 7.4 percent growth rate for salaries, and this year that component increased by 6.8 percent, to an average of $701,001. A big outlier in this category was Zweifach, who led the pack with a salary of $3,000,000. (For the survey methodology, please see “Putting It All Together.”)

But even if we exclude Zweifach, these salary bumps are impressive. “Somebody might look and say, ‘Why does the general counsel get a 7 percent increase, meanwhile I get a 2 or 3 percent increase?’” says John Gilmore, managing partner at BarkerGilmore, an executive search firm headquartered in Fairport, N.Y., that focuses on placing in-house counsel. “The reality is that the general counsel is taking on a lot of responsibilities, and the regulatory environment continues to just become more complex.” He adds that general counsel also have their hands full because many are managing a shift of legal work from outside attorneys to the legal department itself.

Then there’s another, more malleable part of the calculation: the discretionary bonus. If you want to argue that cash is king this year, you can point to this rather old-fashioned part of the pay packet: GCs received an average of $1,211,608 in this year’s survey, an increase of 8.4 percent from last year’s. But even though the raw figures look good, experts agree that many companies are placing less emphasis on this type of pay postfinancial crisis and post-Dodd Frank. They are now more likely to ask executives to meet set performance goals, rather than leave the board of directors to its own compensation devices. “I’m a big believer in the use of discretion in the pay program,” says Todd Sirras, managing director of Los Angeles-based executive compensation consulting firm Semler Brossy. “But say-on-pay has reinforced a sort of us vs. them mentality, which is: If we don’t mind the board, the board is just going to go pay everyone a gajillion dollars because that’s easy and it makes everyone feel good.” Sirras calls the story of general counsel and say-on-pay one of “collateral damage.” Although the scrutiny has largely been on CEO compensation since say-on-pay votes at public companies began, the general counsel has gotten caught up in the changes too.

Just Google it: David Drummond earned $3,650,000 in cash, making him the best-paid tech top lawyer.

Our 2013 numbers demonstrated a strong focus on performance: GCs on the list earned an average of $1,271,867 in the bonus plus “nonequity incentive compensation” category, the highest sum since the survey began, and a 6.3 percent jump from last year. Bonus plus nonequity incentive encompasses performance-based pay in cash only. But quality of performance has become similarly important for GCs when it comes to the shares they receive as part of their pay packages. “Instead of equity, straight shares, and if I’m here for three years I get them and if I leave I don’t get them, there’s a tremendous rise in the use of performance shares, which is what we call things that are going to vest over a period of time if we meet certain performance goals or if we have certain levels of performance,” explains Sirras.

Of course, it doesn’t hurt general counsel receiving these incentives that the financial markets have been doing well. When the outlook on Wall Street is sunny, according to Gilmore, there’s generally more of an eye to performance-based incentives in executive pay. When the markets are less promising, the emphasis shifts back to base salary and guaranteed cash bonus. “Right now we’ve been in several years of good times, and so we’re seeing people just really having a keen eye on the performance incentives,” he says.

From a recruiting perspective, Gil­more adds that the focus on performance-based stock awards has made it more of a challenge to get high-level general counsel to leave their jobs. “Recruiting a general counsel who is currently the general counsel of a large established company is becoming very expensive because they have these large incentive awards that the majority have not vested,” he says. “It makes it very difficult for a general counsel to leave one company and go to another, and it becomes very expensive for the company that’s trying to pull that person.” Many of the general counsel atop the chart this year are longtime GCs, like Denniston, and waiting for their shares to vest may keep them on the list for many years to come.

Although equity has always been an important part of the pay package, the way companies distribute it to top lawyers has changed quite a bit. In the earlier years of our survey, general counsel and their executive colleagues were lured to new jobs by the offer of option awards. However, two financial downturns later, options aren’t looking as enticing. Fortunately, a lot of the gap left by these disappearing options has been filled by good old reliable stock awards, if general counsel perform well enough to get them.

Indeed, many companies gave their GCs substantial stock awards in 2013. Take Frank Steeves of Emerson Electric Co., headquartered in St. Louis, who received $5,218,930 in restricted awards, the best haul on our list. The average stock award in the survey was $1,562,059. This was technically a 33.5 percent drop from last year, but since last year’s numbers were inflated by hefty performance-based awards going to Cupertino, Calif.-based Apple Inc.’s general counsel, Bruce Sewell, the drop is actually much smaller. Without Sewell, the average stock award this year would only be 3.6 percent lower than it was in 2012.

Stock options are so out: They dropped 13.4 percent from last year.

While restricted shares are doing just fine, options did not fare so well in this year’s survey. The average option award for GCs in this year’s survey decreased 13.4 percent from last year. Bob Graff, a partner and recruiter in the in-house practice group at legal search consultants Major, Lindsey & Africa, a global firm based in Hanover, Md., says he’s noticed options becoming less popular in recent years, a pattern that was exacerbated by the financial crisis. “What happens with companies is, when you hit a recession like ’09, all of the executives’ options are underwater, they’re worthless, and it’s no longer a retention tool,” he says. Not so with restricted stock units. “With RSUs, the stock may be down, but even if it’s down, say, 40 percent or 50 percent in 2009, it’s still worth something, right?” he explains.

In addition to breaking the data down by what sorts of pay GCs are getting, we looked at some factors, such as industry, that might influence how much cash a general counsel brings home. The banking and finance sectors paid their GCs the most this year. This group made a princely sum of $22,357,182 in total cash. Not far behind was entertainment, followed by insurance and Big Pharma. Graff believes that such industries as these, which are subject to heavy regulation and high risk, generally value their attorneys highly, hence the big payouts. “I think they also happen to be very profitable industries, and profitable industries tend to pay higher than, say, retail or something where the margins are much lower,” he says.

Want to work in the best-paying industry? That would be banking and finance, where general counsel face tough regulatory challenges.

Despite the wide disparity between industries, it’s hard to deny that the companies in our survey are paying their general counsel well. And with growing amounts of regulation, litigation and strategic business matters to take care of, many GCs have to earn their cash and equity keep. “There’s a continued awareness of the value of a strong general counsel,” Sirras says. “I think many folks are there already. I think they get it. That role is continuing to have a major seat at the table at the senior executive level. I think I can safely say that’s not going to go away.”