Articles on Talent

General Counsel of Fortune 500 companies, company revenue and law school rank

Let’s look at the Fortune 500 companies broken into equal-sized revenue categories and see if there is any pattern about the law school of their top lawyers.

The plot below shows 20 revenue categories increasing from $4.8 billion for the smallest company on the left to $89 billion and up in the farthest-right category. There are 25 companies in each category, plus or minus one.

Revbins and F500 GCs Aug 4          The blue dots above a revenue category each represent one general counsel and the US News & World Report ranking of that person’s law school, which can be read from the vertical Y-axis. As noted before, when two schools have the same rank, this plot combines their graduate numbers. Unranked schools are not included and the law schools of a few general counsel are unknown.

It is apparent that the law schools with ranks from 1 to 50, which some might consider the elite law schools, produced many more general counsel than did the law schools in the two categories above that (51-100 and 101-150). On the other hand, the general counsel are quite evenly distributed across the various revenue ranges.

Leveling off of law school rank and number of general counsel of Fortune 500 companies

July 28 F500 GCs and LS RankSetting aside the number of students in each class of the ranked law schools, is there any pattern in the number of graduates who are Fortune 500 general counsel according to the law school’s rank? The plot above shows the number of graduates by the height of the blue dots and the left axis; the ranking of the schools ranges from number 1 on the left to 150 on the right. Bear in mind that when two schools have the same rank, this plot combines their graduate numbers. Unranked schools are not included.

The evident pattern appears to be that higher ranked schools have more F500 GCs, and the number of GCs per school declines as rankings go lower – until a third of the way across the numbers plateau. Your eye can fill in a line that starts high left, and drops down to about 30, at which point it levels off to the right side of the plot. From about a ranking of 30 on, the numbers bounce around randomly and fairly consistently. One might conclude from this specialized sample that if you didn’t graduate from a very elite law school, it doesn’t matter much if your goal is to reach the top rung of a Fortune 500 legal department.

A better way to depict the line would be with a trend line and confidence levels. But, that treat we hold for another post.

Law schools and their graduates who are Fortune 500 GCs, adjusted for enrollment of law school

My hypothesis was that the larger the law school, in terms of students enrolled, the more graduates it would have who are the general counsel of a Fortune 500 company. To keep the data tractable and the plot below legible, I took the 150 top-ranked schools from US News & World Report and kept only the 34 schools that have at least three such graduates (some of the GCs do not have a law school associated with them).

Next, I divided that graduate number for each law school by the school’s enrollment (it is unclear as I write this whether enrollment includes LLM candidates, JSD candidates and other students aside from the standard three-year LLB or JD students). So that the numbers on the graph are not miniscule, I first divided the enrollment by 100.

Accordingly, the chart below presents the law schools on the bottom axis in alphabetical order and their Fortune 500 GC graduates per 100 enrollees above with a blue dot. Chicago and Harvard stand highest at two or more graduates per 100. Note that the former is a very large school; the other modest. At the other end, Brooklyn and Miami are lowest at about 0.3 (meaning for every three hundred enrolled students they have produced one Fortune 500 GC graduate).

F500 GCs and school by enrollment

My hypothesis fails, judging from the fairly random distribution of the dots.

Which law schools have graduated the most Fortune 500 general counsel?

ALM publishes data about the Fortune 500 companies and their chief legal officers. One of the pieces of information is the law school from which the CLO graduated. Firing up my trusty software for data analysis, I looked at the distribution of those graduates.

The plot below shows how many of that select group of general counsel graduated from each law school where the school had at least two graduates. Thus, the eight schools at the bottom left claim three graduates each. Sixty-eight law schools (out of a total of 117 different schools) had a single graduate or two graduates. I left them out because the graph becomes much harder to read with so many schools on the left axis. By the way, at least two of them are not U.S. law schools!

F500 GCs law schools

 

Having sorted the schools by increasing numbers of GC-graduates, it is clear that primus inter pares, by far, is Harvard Law School. Virginia (19), Michigan (16), and Georgetown (15) trail by quite a bit.

Details to obtain free (or low cost) compensation report for law department administrators

During 2012, General Counsel Metrics collected compensation data for 65 law department administrators.  The report shows medians and quartiles for base salary, bonus, and total compensation as of Dec. 31, 2011 by six industries as well as five revenue ranges (a minimum of four respondents in each).

 

The industries are Construction/Engineering, Food & Beverage, Hospital Systems, Manufacturing, Not-for-Profit/Government, and Technology.  The revenue ranges are less than $1 billion, $1-2 billion, $2-3 billion, $4-5 billion, and more than $5 billion.

 

The report is free for administrators of participants in the current GC Metrics benchmark who request it. For anyone whose law department has NOT participated in the 2012 GC Metrics Benchmark Survey, the report is $45, payable by credit card here: https://www.usaepay.com/interface/epayform/fACVL74999b68PmleL0sQ2ms51SY4shn/  .  The URL to take the short, confidential GC Metrics survey is https://novisurvey.net/n/benchmarkmetrics2012.aspx.  Note in the last question some reference to the administrator’s comp report so we know to send you your report benchmark report plus your comp report.

Finding of approximately one-third for GC compensation of salary, bonus, and long-term incentives – but the data is not representative

An article in the Stanford Closer Look Series (at 2) addresses how government-appointed monitors should be paid.  It cites research by Equilar on the compensation of the top lawyers within large U.S. companies.  “General counsel within Fortune 1000 companies receive compensation that is 43 percent salary, 27 percent annual bonus, and 30 percent cash and equity long-term incentives.”

 

The compensation data available from General Counsel Metrics, provided by 194 general counsel to date, shows a markedly different distribution.  If we take the medians of their salary, bonus, and equity value, of that total amount, 80 percent is salary; 17 percent bonus, and 3 percent equity.  The Equilar data covers publicly-traded companies, and even among them, only the ones with the general counsel in the top five most highly-paid executives.  It is skewed as compared to the many more companies in the United States that are neither publicly traded nor so large nor with relatively well-paid general counsel.

 

If you’re interested in how your pay compares, take the quick, confidential survey.  It’s absolutely free, and you will get your report in early December with staffing and spending benchmarks from more than 1,000 companies.  Do so by clicking on this secure survey link.

Some findings regarding equity awards granted in-house lawyers

The compensation data currently in the General Counsel Metrics study includes almost 1,000 in-house lawyers, of which 404 reported the value of the equity award they received for 2011 (either zero or an amount; the others did not complete that question).  Of that group that reported on equity, 225 got no award (55%) and 179 got an award (45%) of options, restricted stock or some other equity.  The high proportion was a surprise to me, since I thought equity awards were much less common.

 

The average amount of the equity awards was $188,000, while the median was $100,000.  They ranged from very small amounts to well over a million dollars.  The ratio between cash compensation, base salary and cash bonus, and the value of equity awards ranged widely: from less than one percent to 300-400%.

Speculation that comp data of close to 2,000 U.S. GC’s a year are disclosed in annual reports

Some publications regularly trawl the annual reports of U.S. publicly traded companies and assemble those that include the general counsel in the five most highly paid executives.  The articles they publish list the reported data in tables and inevitably headline the general counsel who “made the most last year.”  It is usually someone who cashed in a significant amount from accumulated stock options and restricted stock grants.

 

What I hadn’t seen is data on the number or proportion of general counsel in publicly traded companies who make enough to find themselves one of the top five.  The Conf. Bd. Rev., Summer 2011 at 45, tells us part of the answer: It cites a Towers Perrin study that “recently revealed that CFO’s, heads of legal, and HR leaders showed up among the top five highest-paid execs 76, 38, and 5 percent of the time, respectively.”  I think that means that almost four out of ten annual reports gave the general counsel’s compensation data.  If so, that would be a reasonably representative selection of data.

 

Given that there are something like 5,000 U.S. companies with shares traded on exchanges, every year data must be reported to the SEC and shareholders on close to 2,000 general counsel.

Notaries in Europe and their effects on law department staffing and spending

The vital role played by notaries, particularly in Europe, raised questions for me about the overlap between what lawyers do and what notaries do, and law department management implications. Italy has 5,000 notaries while France has 9,000 of them, and the latter enjoy a monopoly over property conveyancing. Typically, governments fixed the fees of notaries and the profession can be highly lucrative.

 

An article in the Economist, Aug. 11, 2012, at 53 touches, on the changing roles of notaries, but doesn’t mention whether in-house legal departments must pay notaries for their services. If they do, I assume those fees are covered in outside counsel budgets. I would further assume that the requirement to use notaries for some activities reduces to a degree the number of in-house lawyers that are necessary.  Both of those points, if accurate, suggest that the ratio of internal to external spending tilts a bit more toward external.

A general formula based on a recent salary survey to let you see how your pay stands against others who practice in-house

At the recent InsideCounsel SuperConference, the legal search firm of McCormack Schreiber distributed its In-House Counsel Salary Survey.  The firm had gathered self-reported salaries for 2010 through 2012 from 163 in-house attorneys.  Based on the scattergram they created and a linear regression equation, they produced a formula.

 

What the report refers to as “Total Compensation” means salary plus bonus, but excludes the value of any equity awards. Total Compensation equals $140,000 plus 7.23 times the number of years since the lawyer graduated from law school (“Y=140 + 7.23x”).  If you have been out of law school ten years, that would add about $72,000 to the base of $140,000, as an example.  The executive search firm is based in Chicago and its compensation data may have come mostly from lawyers in that region, so I suppose you could adjust this formula’s base amount for your city’s relative cost of living.