Nearly flat as a pancake — that’s an apt way to describe 2009 compensation compared to 2008′s for Texas general counsel who are among the highest-paid executives at their companies.
Pay packages for the chief legal officers at 49 Texas companies averaged $1,702,928 in 2009, 3.4 percent less than 2008′s average of $1,760,327 for 56 GCs at 55 large Texas companies.
The slight decline in average compensation for Texas GCs whose companies are on the Fortune 1,000 list clearly reflects the continuing impact of the nation’s recent economic troubles on executive compensation. The boards of directors of most of the companies set last year’s compensation levels early in 2009, when stock prices were lower than today.
Steve Cross, managing partner of Cogent Compensation Partners in Houston, says a decline of 3.4 percent in total compensation in 2009 for large-company GCs in Texas is consistent with the market. Speaking generally, Cross says base salaries for all executives were flat in 2009, bonuses (paid at year-end) were up, and the value of long-term compensation declined when compared to 2008.
Another executive compensation consultant, Ed McGaughey, managing director and Houston office head of Pearl Meyer & Partners, says he found a slightly different overall result when looking at a larger group of Texas companies: the 250 highest-grossing public companies in Texas. McGaughey says total compensation levels for executives in that group (not just GCs) increased by a small amount in 2009 compared to 2008. He attributes much of that improvement in 2009 to strength in the energy industry.
Nevertheless, the Texas large-company GC pay packages stack up well to the average profits per partner at the 25 highest-grossing firms in Texas in 2009. The $1,702,928 average GC pay at the 49 Texas companies is more than twice the $813,000 average profits per partner in 2009 at the 25 firms. [See "BigTex Combined Gross Revenue Drops in '09," Texas Lawyer, April 26, 2010, page 22.]
This year’s drop is less significant than last year’s, when average general counsel compensation at large Texas companies plummeted 11.6 percent, compared to 2007′s average of $1,991,410 for 51 GCs at 50 Texas companies.
This year, Gjon N. Nivica Jr., senior vice president, general counsel and corporate secretary of Celanese Corp. in Dallas, heads the list of the best-paid general counsel in 2009 in Texas. Nivica, who started his job at Celanese in April 2009, earned a pay package totaling $3,610,736 in 2009, including equity valued at $2,373,500. Nivica did not return a telephone call seeking comment.
While Nivica tops the best-paid list, his compensation is considerably less than the chart-topper last year — Charles W. Matthews, former vice president and general counsel of Exxon Mobil Corp. of Irving, whose compensation totaled $9,700,727 in 2008, including equity valued at $5,490,643. Matthews retired from his GC position in 2010.
Right behind Nivica on the list of best-paid general counsel in Texas in 2009 are GCs of three Houston companies: Albert O. Cornelison Jr. of Halliburton Co., Richard H. Bachmann of Enterprise GP Holdings LP, and William C. Lemmer of Cameron International Corp. [See "Texas' Best-Paid General Counsel."]
According to Texas Lawyer ‘s Corporate Roster 2010, 40 of the 49 GCs on the best-paid list earned compensation in 2009 of at least $1 million, including the value of their equity compensation. That compares to 44 of 56 GCs included in Corporate Roster 2009. [See "Compensation Down for GCs at Big Companies," In-House Texas, Sept. 7, 2009, page 1.]
Texas Lawyer has reported on general counsel compensation in the annual Corporate Roster for the past 18 years.
For Corporate Roster 2010, Texas Lawyer examined executive compensation at the 110 Texas companies on the Fortune 1,000 list. The compensation information is included in financial reports the companies file each year with the U.S. Securities and Exchange Commission.
In those filings, the companies report the total compensation going to their chief executive officer, chief financial officer, and the three highest-paid executives other than the CEO and CFO. The pay packages include salary and bonus and also the value of equity compensation, which can include time- and performance-based restricted stock awards and stock options.
Corporate Roster 2010 includes three charts: “Texas’ Best-Paid General Counsel” lists the total compensation paid to the 49 general counsel in Texasat companies where the GC is among the five highest-paid executives. “The Second Tier” includes an estimate of compensation paid to another 36 general counsel. [See related chart.] The third chart, “Option Exercises and Stock Vesting,” reports on the best-paid general counsel who exercised stock or unit options in 2009, or who had restricted stock or units that vested during the year. [See related chart.]
Some of the general counsel at the 110 Texas companies don’t appear on “Texas’ Best-Paid General Counsel” chart or “The Second Tier” chart. For instance, Galveston’s American National Insurance Co. doesn’t have a general counsel, but it has a longstanding relationship with Greer, Herz & Adams of Galveston, and partner Irwin M. Herz Jr. is an advisory director of American National. Insurance company United States Automobile Association of San Antonio does not file proxy statements. Some companies were acquired recently and did not file proxy statements: Affiliated Computer Services Inc. of Dallas was acquired in February by Xerox Corp.; Burlington Northern Santa Fe Corp. of Fort Worth was acquired in February by Berkshire Hathaway Inc.; and Dallas-based Centex Corp. was acquired in August 2009 by Pulte Homes Inc. The GC for Enbridge Energy Partners LP of Houston is based in Canada, and the GC for US Oncology Holdings Inc. retired in November 2009, and a new GC was not appointed until August.
Additionally, due to disclosure rules, the pay packages of a number of other Texas GCs could not be estimated on “The Second Tier” chart. That chart estimates GC compensation by reporting it as some amount less than the fifth highest-paid executive at a company. The rules require companies to report compensation for their CEO and CFO, even if they would not otherwise be among the top five. If either has the lowest compensation on the list of five highest-paid execs, the GC’s compensation cannot be estimated in Corporate Roster 2010, because it could be greater than the CEO’s or CFO’s pay package.
Those companies include Administaff Inc. of Kingwood, Anadarko Petroleum Corp. of The Woodlands, Benchmark Electronics of Angleton, Dallas-based Southwest Airlines Co., Sally Beauty Holdings Inc. of Denton, Continental Airlines Inc., EOG Resources Inc., Plains All American Pipeline LP and Service Corp. International, all of Houston; Fort Worth’s D.R. Horton Inc.; Flowserve Corp. of Irving; Fossil Inc. of Richardson; Pilgrim’s Pride Corp. of Pittsburg; Dell Inc. of Round Rock; Dr Pepper Snapple Group Inc. of Plano; and Whole Foods Market Inc. of Austin.
Jack Balagia, vice president and general counsel of Exxon Mobil since March, heads “The Second Tier” chart, with compensation estimated at less than $9,694,797, including equity valued at $5,805,415. Next on that chart is Frank G. McDonald, senior vice president, general counsel and assistant secretary of XTO Energy Inc. of Fort Worth, who topped the chart last year.
Brenda Sapino Jeffreys is on Twitter at www.twitter.com/BrendaSJeffreys.