Dive Brief:

• General counsel compensation has risen about 25% over the past four years — driven by stock awards and performance incentives — as GCs assume more roles at medium and larger companies, including roles involving human resources, finance, data security and operations. The median value for stock awards last year was nearly $520,000, a 51% increase since 2019, while the median value of incentives was $945,000, up 34%, according to compensation data from Equilar of the 500 largest U.S. companies by revenue.
• Artificial intelligence use across legal departments and outside counsel will affect the GC role and overall compensation for the role, but it’s too soon to know how, said Adam Hearn, an attorney and principal of Meridian Compensation Partners, an executive compensation consultancy. Equilar sponsored a webinar on GC pay strategies with Hearn and John Gilmore, managing partner at BarkerGilmore, an executive search firm for in-house legal talent. “I think we’re in the top of the first inning when it comes to AI and it’s too soon to have any kind of reliable gauge for what impact AI is going to have,” Hearn said Thursday.
• Candidates mulling a GC role should focus less on income and more on how they view a company’s long-term prospects and the CEO’s strategic vision, as well as the kind of working relationship they’d have with top executives, Gilmore said. “Smart people don’t migrate toward compensation; smart people migrate toward great people and great organizations,” he said.

Dive Insight:

A company’s top-line revenue is the single metric most highly correlated with a legal executive’s pay level, with sales topping other factors such as industry, job experience or workplace charisma, Hearn said.

The complexity of the GC role is also “a huge piece” of how compensation is calculated. If the GC has a broad oversight area beyond legal, such as HR, privacy issues or finance, the compensation will be higher. Compensation is also going to be skewed toward less salary and more long-term incentives such as time-vested or performance-vested equity, he said. 

“A GC candidate can expect less of their comp to be fixed cash and more on variable incentive comp,” Hearn said. “Year-over-year they can expect a smaller cash piece and more adjustments in the long term equity piece.”

At many companies, GCs have found themselves with new responsibilities, from data-security compliance to HR functions. A few years ago, they tended to have COVID-19 responsibilities added to their work.  

How do companies determine how much more pay should accompany this added work?

“I have a really easy answer and the answer is, I have no idea,” Hearn said. “There’s not a simple answer to it. What all drives that is the unique facts and circumstances of the particular company. There is not a 5% premium if HR rolls up to the GC, or a 5% premium if there are new ESG responsibilities that roll up to the GC.”

He said companies often adopt “a sliding scale” approach for how many new hats or complex functions a GC assumes and then boost compensation. “There is no hard, fast rule for the premium that should be applied,” Hearn said. “But it should be part of the discussions.”

Gilmore suggested GCs not focus on short-term gain. “You want to become the company’s MVP,” he said. 

For GCs who receive equity as part of their pay packages, Gilmore said, candidates should clarify the terms of these awards, especially if a company is owned by a private equity firm with plans to go public or be sold.

“A lot of times you get one equity tranche walking in the door and then you won’t see another until the transaction,” he said. Offer letters also typically specify if there is an annual equity award, but most don’t say how much it will be, Gilmore said.

Frequently, said Hearn, “the conversation is not open and transparent, so there is miscommunication or misunderstanding if the award is one time or if it’s annual.”

For lawyers who are being hired or promoted to the GC role at a public company, it’s not realistic to expect the same compensation package as the prior GC, Hearn and Gilmore said. Companies often want to see at least two years of performance in the role before they pay at the same level as their prior GC.

“It’s very common to see a two to three-year glide path to get someone up to that level of the past,” Hearn said.