The Rise and Fall of In-house Counsel Salaries, 2012

In-house counsel almost always have a cash component in their salaries and another component that includes “stock options exercised and stock value realized” (as put by the 2012 GC Compensation survey by Corporate Counsel). The real rise and fall happens in the second component of in-house salaries, which quite often is greater than the cash component, and also subject to the whims of Wall Street. But the ‘cash component' itself is divided into two parts – the salary and the bonus component. And the bonus can also be affected by changes in company practice and policy.
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Simple breakdown of an in-house counsel salary

For example Louis Briskman, the in-house counsel who tops the GC Compensation Survey for 2012, by Corporate Counsel, has a total “take-home” salary of $14,611,037, but the ‘cash component' is less than 50% of that amount. Louis Briskman's Cash Compensation includes a salary of $1,300,000 and a “bonus” of $5,200,000 netting a cash component of $6,500,000.

On top of this ‘cash component' is the other component of stocks which stands at $8,111,037. So, if stock plummets, and the counsel underperforms without meriting bonus, a take-home of $14,611,037 could be legally reduced to a net salary of $1,300,000.

However, such extreme situations are rare and unheard of. Usually, when stocks of a company start to plummet signaling imminent bankruptcy, the corporate counsel would be one of those few, who are in a position to guess poor company performance much before others.

How company policy and performance affects the in-house salary

A case in point was directly mentioned by Corporate Counsel, that of Charles Kalil who slid from the 12^th spot to the 39^th spot on the list of highest paid in-house counsel in the country.

What happened was that as the GC of Dow Chemical Company, Kalik had a $1.8 million bonus, but last year, the company linked the bonuses of all executives to meeting annual company goals deemed critical. The top management in the business was unable to meet the projected cost management and profit targets – and the in-house counsel lost half of his bonus. And he is not alone, most in-house counsel are at the receiving end of such changes in company policies and seeing their pays disappear because of poor performance of stock or poor performance of business managers.

The overall scene in in-house counsel salaries this year

In-house counsel salaries are still on the decline, hurt by shrinking equity and poor performance of Wall Street, and the Great Recovery is straining at the best. The average stock option award fell by 18.7 percent while the average stock award fell by 10.8 percent in 2012 with respect to in-house counsel salaries.

Bonuses also took a hit and while last year had seen a rise of 28.7 percent in bonuses, on this year, bonuses had gone down by a combined 7.7 percent, even though at least 39 lawyers earned more than a million in bonuses. The base pay fell by 1.8 percent to an average of $611,411.

Things are still better than at the depth of the recession, but not as good as those working in the Am Law 100 are experiencing. In 2011, those in private law practice and within the Am Law 100 saw their gross revenues increase by an average of 5.3 percent and profits per partner growing by 3 percent. Compared to that, the in-house salary scene this year isn't very encouraging.

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