Does in-house pay correspond to the value of a practice area to the company?

What truth is there in the following quote? Do general counsel pay more to lawyers whose specialties are vital to the company? “Large corporations, for example, place a high value on limiting their tax liabilities. The most talented corporate tax attorneys are often able to reduce these liabilities by tens of millions of dollars, and their salaries are scaled accordingly. Regulated companies may be viewed as being in high-stakes contests with the government across an even broader front. These contests pit the skills of company lawyers and economists against those of the regulators, and the result is often intense bidding for the economists and lawyers most likely to influence the outcomes. Similar behavior is triggered by decisions about the locations of attractive government facilities, the recipients of broadcast licenses, tariffs and quotas on imports, and other forms of public largess.”

The claim comes from Robert H. Frank and Philip J. Cook, The Winner-Take-All Society (Penguin Books 1995) at 44, but the two sources cited by the authors are at least a decade old and are economists writings about rent rather than data from law departments.

While logical to an economist – demand raises prices — the claim may be wrong. The relative pay of in-house lawyers does not seem to correlate with objective measures of how important their practice area is to the welfare of their client company. On the other hand, this notion may suggest one reason why tax lawyers are typically not part of the law department: they want to preserve their higher pay.

I do not even think in-house pay by practice area correlates with differences in billing rates of outside lawyers in those practice areas.

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