General counsel who are among the highest-paid executives at large Texas companies earned a little more silver to put in their pockets in 2010 than the year before.

Compensation for the chief legal officers at 48 large Texas companies averaged $1,966,590 in 2010, up 15.5 percent when compared to 2009′s average of $1,702,928 for GCs at 49 Texas large companies.

The beefier pay packages are a reflection of improved economic conditions in 2010, compared to the previous two years, when average GC pay packages declined for two years running. 2010′s average pay of $1,966,590 for the big-company general counsel is more than the average package in 2009 and 2008, and close to 2007′s average of $1,991,410 for 51 GCs at 50 Texas companies.

GCs continue to rack up impressive numbers when compared to what partners in large Texas firms make. Profits per partner at the 25 highest-grossing firms in Texas averaged $889,000 in 2010, which is less than half of the $1,966,590 average compensation for the big-company GCs in 2010. [See "New Kids on the Block," Texas Lawyer, April 25, 2011, page 1.]

Steve Cross, managing partner of Cogent Compensation Partners in Houston, says executive compensation went up “meaningfully” in 2010 compared to 2009, and he’s not surprised GC pay packages at Texas companies improved by 15.5 percent in 2010. ” ’09 was a really bad year and 2010 was a turnaround year,” he says.

Cross says he expects more Texas GCs to move into the group of the five highest-paid executives at large companies because their responsibilities are increasing.

“My experience with the GCs we work with is that these guys are the busiest guys on the planet,” Cross says.

Wayne Watts, senior executive vice president and general counsel of AT&T Inc. in Dallas heads the list of the best-paid general counsel in 2010 in Texas. Watts’ compensation totaled $9,244,814 in 2010, including equity valued at $4,011,020.

A telephone message for Watts was returned by Marty Richter, a spokesman for AT&T, who provided a written statement attributed to the company.

AT&T writes that it is committed to “paying for performance” and Watts’ compensation reflects that, noting that nearly 90 percent of his “target” compensation in 2010 was performance-based and aligned with stockholder interests. AT&T writes that, in 2010, Watts “effectively guided the company’s regulatory filings and compliance matters in addition to providing support for day-to-day operations and M&A activity — and successfully managed litigation matters, including 144 appeals to various Federal and State Courts of Appeal and 10 to the United States Supreme Court.”

Following Watts on the best-paid list are Houston GCs Albert Cornelison Jr. of Halliburton Co.; William C. Lemmer of Cameron International Corp.; and P. Anthony Lannie of Apache Corp.

According to Texas Lawyer ‘s Corporate Roster 2011, 40 of the 48 general counsel on the best-paid list earned compensation of $1 million or more in 2010, including the value of their equity compensation. That is similar to 40 of 49 GCs on the best-paid list in Corporate Roster 2010. [See "GCs at Large Texas Companies See Slight Pay Dip," In-House Texas, Oct. 4, 2010, page 1.]

Texas Lawyer has reported on general counsel compensation in the annual Corporate Roster for the past 19 years.

To compile Corporate Roster 2010, Texas Lawyer examined executive compensation at the 101 Texas companies on the Fortune 1,000 list. 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. Their pay includes salary and bonus, the value of equity compensation that can include time- and performance-based restricted stock awards, and stock options.

Corporate Roster 2011 includes three charts: “Texas’ Best-Paid General Counsel” lists the total compensation paid to the 48 general counsel in Texas at companies where the GC is among the five highest-paid executives. [See "Texas Best-Paid General Counsel."] “The Second Tier” includes an estimate of compensation paid to another 36 general counsel. [See "The Second Tier." ] The third chart, “Option Exercises and Stock Vesting,” reports on the best-paid general counsel who exercised stock or unit options in 2010, or who had restricted stock or units that vested during the year. [See "Option Exercises and Stock Vesting."]

The Estimates

Some of the general counsel at the 101 Texas companies don’t appear on the best-paid or second-tier charts. One is American National Life Insurance Co. of Galveston, which does not have a GC. Greer, Herz & Adams of Galveston does its legal work, and partner Irwin Herz Jr. is an advisory board member. Insurance company United States Automobile Association of San Antonio does not file proxy statements. The general counsel of Enbridge Energy Partners Inc. of Houston is based in Canada.

Also, due to disclosure rules, the pay packages of a number of 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 executives, the GC’s compensation cannot be estimated.

Companies in that group include Dallas’ Blockbuster Inc., Southwest Airlines Co., Texas Instruments Inc., Valhi Inc., Celanese Corp., and Dean Foods; Fossil Inc. of Richardson; Alliance Data Systems Corp. of Plano; GameStop Corp. of Grapevine; Anadarko Petroleum Corp. of The Woodlands; Houston’s ConocoPhillips, Buckeye Partners L.P., Enterprise Products Partners L.P., Plains All-American Pipeline L.P., Sysco Corp., Targa Resources Corp., HCC Insurance Holdings Inc., and Service Corp. International; Insperity Inc. of Kingwood; Whole Foods Market Inc. of Austin.; and Dell Inc. of Round Rock.

S. Jack Balagia, vice president and general counsel of Exxon Mobil Corp. in Irving, heads “The Second Tier” chart, with compensation estimated as less than $8,806,608, including equity valued at $5,292,595. Following Balagia on the chart are Arnold J. Johnson, senior vice president, general counsel and secretary of Noble Energy Inc. of Houston; and C. Morris Davis, general counsel and secretary of Austin-based Temple-Inland Inc.