The Rise of the General Counsel

Amit Batish is Manager of Content and Communications at Equilar, Inc. This post is based on an Equilar memorandum by Mr. Batish, Nathan Grantz, Christy Hershey, Erin Lehr and Samuel Zhu.

Today’s General Counsel (GC) is viewed as much more than a corporate lawyer. Traditionally seen as the top legal officer of a corporation, General Counsel have taken on greater responsibilities that now entail a mix of strategy and risk management. The current business climate and the COVID-19 crisis have further exacerbated this concept. More than ever, corporate boards and executive management teams rely on General Counsel for astute leadership on a host of issues, including crisis management, corporate transactions, regulatory compliance and much more. The General Counsel is no longer limited to the role of the legal watchdog who oversees litigation, but rather plays a pivotal role in corporate decision-making.

The 2020 Equilar publication General Counsel Pay Trends, which features commentary from executive search firm BarkerGilmore, analyzes General Counsel compensation over the last five years across the Equilar 500—the 500 largest U.S. companies by revenue—including how pay compares in regards to gender and tenure. The publication discusses how the role has advanced over the years and become much more critical in the boardroom. This post features highlights from the report and how companies elect to compensate their General Counsel.

The COVID-19 pandemic has inundated General Counsel with a wave of challenges and uncertainty. General Counsel are navigating their organizations through various issues, such as employee and customer safety, and ensuring business operations continue despite a shifting landscape. Of course, the nation is also in the midst of a movement focused on social justice. Consequently, General Counsel are focused on keeping corporate diversity and inclusion initiatives front and center.

“Since the beginning of the pandemic, General Counsel and their law departments have risen to the challenge and continued to face the high-water mark for business intensity,” said John Gilmore, Co-Founder and Managing Partner at BarkerGilmore. “Trained for crisis management, General Counsel are relied on now more than ever by CEOs and boards for their strategic insights, finely tuned leadership skills and ability to influence others.”

Of course, with the increased responsibility, General Counsel pay has seen a rise over the years. At companies with revenue over $20 billion, median General Counsel total compensation reached $4.6 million in 2019—a 2.6% increase from 2018 (Figure 1). Median General Counsel pay among companies with over $20 billion in annual revenue was 81.6% higher than median pay for the next highest revenue range.

Typically, the more senior and tenured an executive is at a particular company, the more that individual is compensated. In the case of General Counsel, this trend does not hold true.

More Women Occupy General Counsel Roles but Are Paid Less Than Men

The topic of gender equality remains a hot-button topic across Corporate America, including at the executive level. The General Counsel is among few executive roles in which women have made progress, though still lag considerably behind their male counterparts. Across the Equilar 500, 56 women held a role of General Counsel in 2019, while men occupied 113 of these roles.

As the number of male Equilar 500 General Counsel has fallen in the last three years, the number of female General Counsel increased consistently since 2015. However, pay for men has steadily increased since 2015, while pay for women has fluctuated. In 2019, total median compensation for male General Counsel reached $2.8 million, while median pay for women was $2.5 million (Figure 2).

The discrepancy in compensation between men and women can be largely attributed to performance incentives. Male General Counsel were awarded more than $735,000 in performance incentives at the median in 2019. On the contrary, women were awarded just over $567,000 in performance incentives. The only pay component in which female General Counsel out-earned men was stock awards. The median value of stock awards granted to female GC was $13,000 higher than that of male GC. Regardless, as the role of General Counsel continues to expand, the focus on gender pay equity will indeed continue to capture attention from key stakeholders.

Newly Appointed General Counsel Earn More Than Veteran Counterparts

Typically, the more senior and tenured an executive is at a particular company, the more that individual is compensated. In the case of General Counsel, this trend does not hold true. Among Equilar 500 General Counsel, median compensation peaked among those GC who have been at their companies for 0–5 years at $2.9 million (Figure 3). Interestingly, median compensation was lowest for General Counsel who have been at their companies for 20 or more years. The General Counsel appears to be an executive position in which remaining at a company long-term limits earning potential. The demand for GC was not as high as it is today, and thus newly appointed General Counsel are compensated at record highs, given the competition. The study also revealed that, in general, the average GC experiences higher compensation as more time passes since being awarded a juris doctorate (JD) degree.

How Will COVID-19 Impact GC Pay?

While the role of General Counsel has been known to be expanding for several years now, 2020 has created a variety of new challenges and opportunities for these top legal officers. “The successful, modern-day GC is equally savvy in legal, compliance and business matters, while possessing the gravitas, emotional intelligence and leadership abilities necessary to influence others and create trusted relationships at all levels, both inside and outside of the company,” said Gilmore.

As 2020 has added a new element of complexity to the GC role with companies seeking leadership in navigating their organizations through COVID-19, one might wonder how this will impact GC pay moving forward. There is no question that executive pay as a whole is likely to decrease in 2021 given the current market conditions. The General Counsel, however, may be the one exception. While it is speculation at this point, one could argue that given the need for leadership during this time of crisis, companies may reward their General Counsel generously, as competition is at an all-time high to recruit and retain top legal talent. Time will tell how this story plays out, but one thing that stands true is General Counsel are making their presence known across Corporate America.

“History will undoubtedly hold 2020 as the year of an unprecedented health crisis and a long-awaited turning point for social justice,” said Gilmore. “By all accounts, optimism, strategic adeptness and the ability to build relationships founded upon trust are three of the most critical elements to [General Counsel’s] success.”

The complete report is available here.

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