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Compensation in legal departments, if true to usual norms, is not distributed by productivity of the lawyers

“Any three workers in a group performing similar tasks earn substantially more than any other two.” This quote from the NY Times, April 25, 2010 at BU4, befuddled me. The author, a respected economist at Cornell, explains that while economic theory holds that the combined salaries of the two best Associate General Counsel should be higher than the combined salaries of the bottom three AGCs, in reality they do not. Far from it. The most productive lawyers at any level are likely paid less than the relative value of what they produce (See my post of Aug.18, 2006: high-quality lawyers are far more productive.).

Prof. Frank speculates that this seeming anomaly continues to exist because good performers care not only about pay but also about status. Accordingly, in exchange for admiration and exaltation they accept the nominally inequitable compensation. All of this goes to empirical data that I do not have on how well in-house pay matches ability and productivity.

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