Most corporate general counsel in South Florida earned greater compensation last year than in 2010, and many did so by taking a bigger equity stake in their employer, a survey of public company records shows.
While many corporate general counsel got a modest raise in salary, if any at all, many received substantially more noncash compensation in the form of restricted stock in their companies and options to buy stock.
A Daily Business Review review of Securities and Exchange Commission filings shows an average increase of 23 percent last year in the total compensation of South Florida general counsel including salary, bonus money, stock awards, stock options, insurance, long-term incentive plans, pensions and perks.
General counsel at the region’s public companies continued to collect a bigger share of their compensation from salary and bonus money than from stock awards and stock options, but the gap between cash and equity narrowed.
Many chief legal officers are commanding more compensation by giving their employers a better handle on legal costs. As the post-recession economy slowly grinds along, many companies with legal departments are putting more pressure on their general counsel to maximize in-house productivity and minimize spending on outside attorneys.
Cash-conserving corporations have moved their legal departments “more under the microscope in terms of cost control,” said Robert Graff, vice president of global business development in the Atlanta office of Major, Lindsey & Africa, a Baltimore-based recruiter of legal talent. “Ten years ago, a GC could say, ‘Look, this is the legal budget for litigation, and it involves a bunch of complicated stuff. I don’t know if I meet budget or not. CFO, leave me alone.’ ”
These days, most chief financial officers are giving legal departments the same scrutiny they apply to other operations, even though general counsel technically direct non-operating activities.
“It’s sort of like the legal department has been pulled out of the black box or from behind the curtain, and they’re out in the open like every other cost center,” Graff said. “That’s the biggest trend I’m hearing from GCs now.”
General counsel increasingly consider a wide range of staffing options to take care of everything from routine contract work to business acquisitions and securities offerings.
“Some GCs are responding by using more temporary lawyers or contract lawyers, which is a definite trend,” Graff said. “If they use an outside law firm, the average cost might be $400 to $500 per hour. If they use an in-house lawyer, it might cost them $100 an hour. They can get a contract lawyer for $120 to $150 per hour.”
General counsel at Florida’s largest public companies are paid well for their work, but not all in cash. The survey shows Jonathan P. Ferrando got more total compensation than any other corporate GC in South Florida last year, but his take-home pay was unchanged. He is executive vice president, general counsel and corporate secretary of Fort Lauderdale-based AutoNation, the nation’s largest automotive retailer. Ferrando is responsible for legal matters, human resources and corporate development.
An award of AutoNation stock options accounted for $2.1 million of his $3.1 million compensation package, which included a base salary of $561,000 and no bonus money, both unchanged from 2010 and 2009. His total compensation increased 8 percent last year. AutoNation hired him in 1996 to work in its legal department, promoted him to general counsel in 2000 and gave him responsibility for human resources in 2004. He formerly was a Chicago-based corporate attorney with law firm Skadden, Arps, Slate, Meagher & Flom. He earned a bachelor’s degree in economics from the University of Michigan in 1988 and graduated Harvard Law School in 1991.
The review of SEC filings shows general counsel at public companies based in South Florida got an average of 43 percent of their total compensation from salary and bonus income last year, down from 49 percent the year before. Awards of stock and stock options accounted for an average of 37 percent of their total compensation last year, up from 32 percent in 2010.
Patricia K. Fletcher got a salary of $600,000 last year, down from $700,000 from the year before. But the general counsel of Kissimmee-based AV Homes also got a stock award worth $890,000 after getting a much smaller one worth $30,000 in 2010, and her total compensation in 2011 doubled to $1.5 million. Like compensation for other general counsel, Fletcher’s reflects multifaceted duties that extend well beyond just running the corporate legal department of the housing developer and builder.
“Currently, I’m executive vice president, general counsel, corporate secretary, human resource director, and I oversee risk management” involving the placement of insurance coverage for AV Homes, she said. “The company has given me more responsibilities. … I pretty much manage all the noncore parts of the business.” The business was known as Avatar Holdings until it changed its name to AV Homes in February, and it was based in Coral Gables before moving its headquarters late last year.
Fletcher, who joined the company in 2007, recently resigned and began helping the company find her successor. She will continue working on certain projects for the company as outside counsel after her resignation becomes effective. “I am leaving the company for personal reasons,” she said. “I’m leaving on very good terms.”
Many chief legal officers have made themselves more valuable by clamping down on costs. The amount of legal costs to be controlled varies with the legal intensity of the business. A wholesale distributor, for example, routinely writes contracts with suppliers and customers. A software business with limited revenue nevertheless may need substantial legal guidance to protect its intellectual property. A large retailer with multiple locations and a large work force is likely to face a steady stream of slip-and-fall lawsuits and wage-and-hour complaints. Regardless of the type of business, however, many companies with legal departments are pressing their general counsel to use in-house resources to greatest extent possible.
“We do as much work internally as we can,” said Alberto de Cardenas, executive vice president, general counsel and corporate secretary of Miami-based specialty contractor MasTec. The company rewarded his effort last year. De Cardenas’ compensation in 2011 increased about 25 percent from 2010, driven higher by a bigger cash bonus and a larger stock award. Before joining MasTec in 2003, de Cardenas worked as a corporate and securities lawyer at law firm Broad and Cassel from 1996 to 2002. He previously worked as an accountant for Deloitte & Touche.
His annual cash bonus from MasTec rose to $350,000 last year from $200,000 the year before. While most members of top management were eligible for cash bonuses up to 100 percent of their base salary, de Cardenas was eligible for a maximum of 50 percent, a reflection of the non-operating nature of his duties.
But no bonus was guaranteed: MasTec last year decided against setting minimum or guaranteed payments of cash bonuses to other top executives, opting instead to make bonus payments discretionary based on overall corporate performance, which was pretty good. The company said in its proxy statement this year that it awarded cash bonuses for 2011 to de Cardenas and other executive officers “on the basis of MasTec’s continued improvement despite a difficult economic environment, a strong balance sheet, a new $600 million credit facility and the successful integration of several key acquisitions.”
Other public companies cite specific accomplishments by their general counsel in proxy-statement explanations of their pay. For example, Richard B. Vilsoet, vice president, general counsel and secretary of Dycom Industries in Palm Beach Gardens, got a 42 percent annual increase in compensation last year for resolving class-action suits against the company, among other achievements.
Vilsoet’s compensation of $888,441 included a base salary of $333,125, which was unchanged from 2010 due to a policy decision by the board of directors’ compensation committee. Dycom, a specialty contractor for work on telecommunications and other types of infrastructure, kept base salaries for all top executives unchanged “as a result of the company’s disappointing fiscal 2010 financial performance,” according to the company’s proxy statement this year.
But Vilsoet collected substantially more in bonus money, stock awards and stock options last year than in 2010, which, according to the proxy, “reflected the successful conclusion of a number of wage and hour class action lawsuits, his work supporting the company’s broadband stimulus efforts under the American Recovery and Reinvestment Act of 2009 and his efforts in a connection with the company’s fiscal 2011 acquisitions,” plus a corporate refinancing. Vilsoet has been Dycom’s general counsel and corporate secretary since 2005. He previously was a partner at the international law firm Shearman & Sterling, where he worked for more than 15 years.
General counsel at South Florida’s largest public companies earn above-average compensation compared with their counterparts at smaller companies in the region. On average, “I’ve seen base salaries coming in the $120,000 to $200,000 range for general counsel and assistant GCs,” said Debbie Montero, division director of permanent placement in the Miami office of staff recruitment agency Robert Half Legal.
But she also said cautious companies have pared bonus programs for general counsel. “Last year we saw bonuses going up to 50 percent” of base salary, and now “we’re seeing it more in the 20 percent range.”
She said some companies hire general counsel at reduced pay on a probationary basis and provide “a guaranteed raise in 90 or 120 days” if the GC’s performance is satisfactory.
The South Florida operations of Robert Half Legal have been buoyed by a better market for in-house legal talent, particularly in health care and commercial real estate. But such hires can take a long time to complete. Employers seeking to hire general counsel often are willing to wait months to find the best possible candidate.
“We have a [general counsel] position for which we got the original order in December, and they just did their final interview today,” Montero said in an Aug. 1 interview. “Companies are taking several months to hire. They want to make sure they’ve seen every candidate out there, and they’re really focused on the soft-skills component. Is the candidate a team player? Would they get along with everyone in the office? Do they have a good attitude? … They don’t like top attorneys from big law firms because they’re too aggressive, come off too strong.”
The best candidates for top jobs in corporate legal department often are those with previous experience as in-house lawyers. But slow-growth business conditions have led some companies to reconsider inexperienced candidates fresh out of law school.
“Some corporations are rethinking how they hire based on the downturn in the economy,” said Marcy Cox, assistant dean for career development at the University of Miami’s law school.
The school has an externship program that enables students to get practical legal experience for academic credit at participating companies and public institutions.
“It’s been around for awhile, but we expanded it about three years ago,” Cox said. “We saw that the students were not getting paid positions, and we wanted them to have the opportunity.”
Participating companies have included MasTec, the Miami Dolphins and Miami-based Ryder System. IMG Worldwide, the New Jersey Nets and Viacom and other companies based outside Florida also have gotten free legal help from UM law students through the program.
“We have so few corporate counsel offices in South Florida,” Cox said. “But we are seeing that this is happening more and more across the country.”