11 October 2017

General counsel reap pay rewards for enhanced role

GCs hit the big pay league with many earning over a million dollars.

The changing role of top legal officers is leading to increases in compensation with many earning over one million dollars. A wider role sees them enjoying pay and equity rewards in line with other C-suite executives.  A report from Equilar, 'General Counsel Pay Trends', analysed the levels of pay at a range of companies and the increasing allocation of stock to top company executives and found that new responsibilites were providing opportunities for increased rewards. 

GC pay

The report found that in the year from 2015 to 2016, the largest increase in both absolute value (approximately $111,000) and percentage-wise (8.1 per cent) occurred for GCs in companies between $1 billion and $5 billion in revenue, reaching a median $1.5 million in total compensation. Meanwhile, GCs at companies with revenues of less than $1 billion experienced a 6.6 per cent increase (or $56,000) in median pay to nearly $918,000 in 2016. GCs at companies reporting revenues between $5 billion and $15 billion saw total compensation rise 3.3 per cent to a median $2.4 million in 2016, an absolute increase of about $75,000. Finally, GCs at companies reporting revenue over $15 billion were the only group in the study to see a pay decrease from 2015 to 2016. However, while pay was down 0.6 per cent from the previous year, the top legal advisors at these companies were awarded by far the largest amount at a median $3.8 million. 

Increased responsiblities

'For most GCs, their role evolves during their tenure to include responsibilities beyond legal and compliance,' said Bob Barker, managing partner for corporate counsel search firm BarkerGilmore, 'For example, a GC’s initial role might begin with legal, compliance, and governance, but grow to include other functions including human resources, risk management, government relations, communications, and even business oversight. As responsibilities are added, compensation follows suit.' 

Stock grants

One of the key contributions to total compensation among GCs in recent years has been the increasing value of stock grants, which is consistent with other roles in the C-suite, particularly at larger companies. 'The GC has become an integral part of the executive team, and many GCs now have the title of Chief Legal Officer (CLO) to reflect their seat at the table,' said John Gilmore, also a managing partner with BarkerGilmore. GCs at companies over $15 billion in revenue were awarded more than seven times the amount in stock value compared to companies with revenue less than $1 billion. Equity accounted for about half of total compensation at the smallest companies in the study, and nearly two-thirds at the largest, so it remains a critical component of pay regardless of company size. 

Performance-based awards

 As a larger percentage of compensation for GCs is provided in equity, pay has shifted to performance-based awards, meaning that executives only receive stock and options grants if they meet predetermined goals. Similar to pay structures for CEOs and other top executives, relative total shareholder return (TSR) was the top performance metric tied to long-term incentives for GCs at public companies, followed by return metrics and earnings per share. More than half of companies that awarded performance pay relied on TSR, more than double the amount that used any other measurement. 'Streamlining the contract process and winning business, optimising IP, closing acquisitions, minimizing risk including litigation, regulatory, privacy & security, labour & employment all contribute to shareholder value,' Mr Gilmore said. Click here to request a download of the full report.