Average general counsel compensation at large Texas companies ballooned in 2012, according to Texas Lawyer‘s annual Corporate Roster, which reports on general counsel pay packages.

Compensation for general counsel at 50 large Texas companies averaged $2,433,585 in 2012, up 10.7 percent when compared to an average of $2,198,109 for the chief legal officers at 51 large Texas companies in 2011.

It’s the third year in a row that average GC compensation improved compared to the previous year, which reflects the improved national economy. Average GC compensation declined in 2009 and in 2008, which match years when the nation’s economy struggled.

Compensation for GCs continues to far exceed what partners in large Texas firms make. The $2,198,109 average compensation for GCs at large Texas companies is more than double the $961,000 that partners in Texas’ highest-grossing firms earned on average in 2012. [See "Lean, Mean Money-Making Machine," Texas Lawyer, April 29, 2013, page 1.]

Wayne Watts, senior executive vice president and general counsel of AT&T Inc. in Dallas, again tops the list of Texas’ highest-paid general counsel, with a total pay package of $7,680,348, including equity valued at $3,405,785. That’s 9.7 percent less than in 2011, but still enough to put Watts at the top of the list. [See "Chief Legal Officers' Compensation Up 11 Percent," In-House Texas, Oct. 1, 2012, page 1.]

Marty Richter, a spokesman for AT&T, says “AT&T remains committed to paying for performance, and Mr. Watts’ compensation reflects this.”

Following Watts on the Texas’ Best-Paid General Counsel chart are John F. Wombwell of Plains Exploration & Production Co. of Houston, which was acquired by Freeport McMoRan Copper & Gold Inc. in May; Robert K. Reeves of Anadarko Petroleum Corp. of The Woodlands; Larry M. Hutchison of Torchmark Corp. of McKinney; and Charles S. Parrish of San Antonio-based Tesoro Corp.

All but seven of the 50 GCs on the best-paid chart earned more than $1 million in 2012, including the value of their equity compensation. Last year, all but six of 51 GCs earned more than $1 million in compensation in 2011.

Texas Lawyer has reported on general counsel compensation in the annual Corporate Roster for 21 years.

Methodology

To compile the Corporate Roster, Texas Lawyer examined executive compensation at the 101 Texas companies on the Fortune 1,000 list. Compensation information is included in the 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, and the value of equity compensation that can include time-and performance-based restricted stock awards and stock options.

Executive compensation consultant Chris Earnest, a vice president at Pearl Myers Partners in Houston, says general counsel are generally fourth or fifth on the list of the five highest-paid executives at a company and they frequently move on and off the list. He says equity compensation generally makes up 50 to 60 percent of a GC’s pay package.

The Corporate Roster includes three charts. “Texas Best-Paid General Counsel” lists the total compensation paid to the 50 general counsel in Texas at companies where the GC is among the five highest-paid executives. “ The Second Tier” chart includes an estimate of compensation paid to 25 other GCs. “ Option Exercises and Stock Vesting” reports on the best-paid general counsel who exercised stock or unit options in 2012, or who had restricted stock or units that vested during the year.

Some of the general counsel at the 101 companies do not appear on either the best-paid or second-tier charts. For instance, U.S. Automobile Association of San Antonio does not file proxy statements. The general counsel of Enbridge Energy Partners Inc. in Houston, David Robottom, is based in Canada. American National Insurance Co. of Galveston does not have a general counsel, but Greer, Herz & Adams of Galveston serves as outside counsel. Greer Herz partner Irvin M. Herz Jr. is an advisory director of American National. Greer Herz received $7,610,000 in fees and reimbursements of expenses in 2012, along with offices, telephones and office decorations.

Others without a general counsel on one of the charts include The Neiman Marcus Group Inc. of Dallas. Former senior vice president and general counsel Nelson Bangs left the company in May 2012, and Tracy Preston became senior vice president and general counsel in February.

The compensation of general counsel at several other Texas companies cannot be estimated on “The Second Tier” chart because of disclosure rules. That chart estimates GC compensation by reporting it as some amount less than the fifth-highest-paid executive at a company. However, the rules require companies to report compensation for the CEO and CFO, even if they would not otherwise be among the top five. If either had the lowest compensation on the list of the five highest-paid, the GC’s compensation for 2012 cannot be estimated.

Companies in that group, all from Houston, include Stewart Information Services Corp., HCC Insurance Holdings Inc., Exterran Holdings Inc., Noble Energy Inc., Targa Resources Partners, Quanta Services Inc., Kinder Morgan Inc., Halliburton Co., Plains All American Pipeline, Sysco Corp., and ConocoPhillips Co. Others are Kingwood-based Insperity; Fossil Inc. and Lennox International Inc., both of Richardson; Rush Enterprises Inc. of New Braunfels; Texas Instruments Inc, Southwest Airlines Co. and Valhi, all of Dallas; Dell Inc. of Round Rock; and Zale Corp. of Irving.

For the third year in a row, S. Jack Balagia of Exxon Mobil Corp. of Irving tops “The Second Tier” chart with a pay package estimated as less than $17,848,401, including equity valued at $7,327,740.