Many chief legal officers at publicly traded companies commanded better pay last year as their legal departments handled bigger workloads amid slow, yet steady economic growth.
Most of the top-paid chief legal officers at Florida's public companies who have more than two years on the job got an increase in total compensation last year compared with 2011, according to a survey by the Daily Business Review.
The survey shows most top-paid CLOs took home bigger salaries for starters. Many also collected more bonus money, more stock-based compensation or both for their efforts, including cost-control initiatives. Companies increasingly incentivize their top in-house lawyers to make their departments as efficient as possible and to minimize spending on outside legal help.
Ryder System Inc., for example, has law firms bid fixed fees, not hourly rates, to handle routine legal work involving employment cases, labor union contract negotiations and issues involving pensions and other employee benefits.
"We actually bid that work out — those three buckets, those high-volume, repetitive cases," said Robert D. Fatovic, executive vice president, chief legal officer and secretary of the Miami-based provider of transportation and logistical services. "The firms can all bid on it. It really has helped us reduce outside spending in those areas."
Fatovic assisted his own cause in the process. He was the sixth-highest paid general counsel of a public company in Florida last year with $1.78 million, up 32 percent from $1.35 million in 2011, driven mainly by an increase in stock awards. He joined Ryder in 1994 as assistant division counsel. He went on to hold several positions with increasing responsibility in the company's law department. Before joining Ryder, he was an associate specializing in litigation and environmental law at Hannoch Weisman in New Jersey. He earned a law degree and a bachelor's in finance from Boston College.
While his duties have remained unchanged in recent years, "it feels like the scope of everything I've done has expanded," Fatovic said, citing increased "regulatory and legislative activism" in recent years. He cited, for example, new guidance from the Justice Department on the Foreign Corrupt Practices Act, which he has translated for thousands of Ryder employees. "It's a lot of work," he said, "and it's something we weren't doing before."
The company's 2011 acquisition of Total Logistics Control, a food storage and distribution business, also imposed the burden to comply with U.S. Food and Drug Administration regulations, "which we didn't have before."
Ryder farms out 40 percent of its legal work.
"With a department our size, we try to do at least 60 percent of our work in-house," Fatovic said. "The funny thing about legal departments is, if you do a great job, no one will ever know what was avoided. You're not reading it in the paper. There's issues that are resolved all the time that the company wants to keep confidential."
Ebb And Flow
MasTec Inc. farms out legal work reluctantly. While the Coral Gables-based company sometimes hires self-employed lawyers to handle such temporary assignments as routine contract work, "I try to do as much as I can internally," said Alberto de Cardenas, executive vice president, general counsel and corporate secretary of the specialty construction contractor.
De Cardenas said he is handling more mergers and acquisitions in-house than in years past, and the company relies on David A. Barkus, a shareholder at Greenberg Traurig, for outside counsel on large M&A deals.
"He's a superstar," de Cardenas said. "We'll do smaller deals internally."
There is nothing small about his compensation: de Cardenas was the 12th-highest paid chief legal officer at a Florida public company with total compensation of $1.3 million last year, including a $420,000 incentive-plan bonus after getting no bonus income in 2011 when his compensation totaled $841,935. His increased pay reflects "his strong performance, as evidenced by the successful consummation of key strategic acquisitions and other legal matters," according to the proxy statement MasTec issued this year for its annual shareholder meeting.
De Cardenas joined MasTec in his current position in 2005 and previously served as general counsel of Miami-based apparel company Perry Ellis International Inc., a corporate and securities attorney at law firm Broad and Cassel and an accountant at Deloitte & Touche.
His increased pay also reflects the tendency of GC compensation to rise and fall along with compensation for other senior executives in the same company. Other MasTec top officers also collected more compensation last year than the year before. "For the general counsel, it tends to be tied into the rest of the team," said Robert T. Graff, a partner in the Atlanta office of legal talent recruitment firm Major, Lindsey & Africa.
Graff said many chief legal officers of public companies are collecting more cash and equity-based compensation because of better performance by their companies and by the economy.
In addition, "general counsel have benefited from the improvement of the stock market," he said. "I've seen situations where somebody joined the company in '08 or '09, and they've had just a tremendous amount of appreciation in the equity portion of the comp."
General counsel who already have a similar job at another company often fill GC vacancies at companies unwilling to promote an assistant or associate GC from within, Graff said.
"We probably do 30 to 40 searches a year for a chief legal officer," he said. The successful applicant "almost always comes from a competitor at a similar-sized company who's doing the exact thing they need done — and almost never comes from a law firm."
Major, Lindsey & Africa, which conducts GC searches for companies with annual revenue in excess of $500 million, finds relatively few general counsel willing to change jobs, especially if they have sizable paper profits in the form of unvested equity awards.
"Sometimes they can have significant appreciation that's unvested on the equity side," Graff said. But a prospective new employer "doesn't necessarily want to make them whole for what they're walking away from," so many general counsel stay put instead of quitting to take new jobs.
Graff also said more corporate legal departments are handling bigger workloads by making greater use of temporary lawyers for routine assignments while refusing to pay outside law firms premium hourly rates for the services of associates.
"Some corporations are saying, 'We're not going to pay for the first- or second-year associate you're going to put on our account … We're not going to pay you $350, $400 an hour for it. We're not going to do that.' So that's a pretty dramatic shift," he said. "I think it was accelerated by the recession and cost pressures at corporations."
General counsel themselves face plenty of pressure, especially those who guide companies with international exposure to legal and regulatory risks. "Basically you assess and you address risk," said Ryan Patch, one of the highest-paid CLOs in the state. He earns a living largely by staying current with the constantly shifting regulatory landscape in the United States and Europe for B/E Aerospace Inc., the world's largest manufacturer of cabin interiors for commercial aircraft and business jets.
Wellington-based B/E operates in the United States and in several European countries, so Patch and the rest of the legal department regularly deal with changes in compliance requirements across multiple jurisdictions, including some that conflict with each other.
"It does keep us quite busy," he said. "Regulations vary from country to country. What they are in France is not what they are in Germany and not what they are in the U.K. and not what the are in the Netherlands. And we deal in all four of those areas."
He also said regulatory agencies have been monitoring B/E more closely for compliance violations as the company has grown in recent years, raising its annual revenue to $3 billion last year from $2.5 billion in 2011 and $1.9 billion in 2010.
"You become a target for compliance because now you're an example," Patch said. "You're big enough that people will take notice of you if they can make an example out of you. … So you have to be very vigilant in the compliance aspect." In addition, "you become a target of competitors."
Patch's total pay last year rose 14 percent to $1.62 million from $1.42 million. He has been vice president-law, general counsel, secretary and chief compliance officer of B/E Aerospace since 2009. He previously was a shareholder and a director at Jackson, DeMarco, Tidus & Peckenpaugh, a law firm in Irvine, California.
Debbie Montero, director of permanent placement services in the Miami office of Robert Half Legal, said small, privately owned companies are paying more for general counsel. She said $150,000 to $250,000 is a common range for starting base salaries for general counsel "at smaller companies, not necessarily public companies."
"The legal departments are increasing their in-house capabilities, hiring additional compliance managers, contract administrators, sometimes a junior attorney with several years of experience," she said. "That's a trend we've been seeing for sure. … I think corporate legal departments are hiring more staff."
Montero also said companies in the Miami area doing business in real estate, health care, manufacturing, telecommunications and media have been prominent bidders for in-house legal talent, especially bilingual candidates. She cited, for example, "international companies that are requiring a Spanish or Portuguese language requirement."
Companies in general "are just overall busier," she said. "Their workload is increasing. There's more business. There's more contracts."
How do shareholders themselves feel about compensation for chief legal officers?
Sweeping financial reforms under the federal Dodd-Frank Act include a requirement that public companies hold a nonbinding shareholder vote to approve or reject executive compensation levels at least once every three years. These votes provide a general sense of shareholder attitudes toward pay for top officers, if not individual chief legal officers in particular, at public companies.
The Daily Business Review survey of Florida public companies with the highest-paid chief legal officers found that most of them recorded more than 90 percent of their shareholder votes this year in favor of nonbinding approval of executive pay. The survey of voting at annual shareholder meetings found that more than 10 percent of the shareholder votes were cast against executive pay levels at five Florida-based public companies: 15 percent at Health Management Associates Inc. of Naples, which is up for sale for $7.6 billion; 15 percent at home-builder Lennar Corp. in Miami; 17 percent at Sykes Enterprises Inc. of Tampa; 22 percent at Roper Industries Inc. in Sarasota; and 37 percent at Miami-based cigarette maker Vector Group Ltd.