October 12, 2022 – Beyond the ever-increasing level of connectivity and complexity in the business environment, emerging issues in the last several years have re-shaped priorities for public companies in areas ranging from human capital management to political activity and data security. Growing social movements have brought a sharper focus to diversity, equity, and inclusion from investors, employees, and consumers alike. A fraught political climate in the U.S. has contributed to greater scrutiny of political actions and prompted some companies to consider making public statements on a range of issues. More recently, the COVID-19 pandemic and related disruptions presented new challenges and exacerbated older ones, from remote management and health and safety, to turnover and competition for talent.
The general counsel sits at the intersection of many pressing governance concerns for modern companies, leading to an expansion of the GC’s responsibilities at many firms and a growing number of GC serving at the highest levels of corporate leadership. As economies and companies continue to globalize, traditional GC functions related to compliance, M&A, and litigation are increasingly demanding in their own right, even as new expectations are added for the role at many firms, according to a recent report from corporate leadership data solutions company Equilar, which features commentary from executive search firm BarkerGilmore. “Once understood primarily as the company’s top lawyer and corporate secretary, general counsel today are more commonly understood as a top executive decision maker on matters of strategy and risk management,” said the study.
These days, you can expect to find the general counsel among the senior-most leaders at companies everywhere. “GCs today have earned a seat at the table, not as practice area experts, but as members of the executive team,” said John Gilmore, cofounder and managing partner of BarkerGilmore, in a recent interview with Hunt Scanlon Media. “The effective GC must speak regarding executive, sales, finance, people management, regulatory, compliance, politics, risk management, and law across distinct cultures and jurisdictions. This skill requires unique emotional intelligence, intellectual flexibility, and courage that is not required of similar roles within the corporate hierarchy. To demonstrate leadership under those circumstances is both necessary and critical to managing the GC function well. It is also an enormous challenge.”
GCs continue to take on issues like data privacy and security, regulatory and compliance, corporate governance, and intellectual property. But 2022 has brought some new challenges to the table. First, talent retention and acquisition have become a source of concern for most GCs. “With compensation on the rise, many GCs have budget restrictions preventing increases in compensation for those on the team and instituting limits on how much can be allocated to hire outside talent,” said Mr. Gilmore. “With limited potential to increase employee compensation, many are seeing resignations as members of the law department receive offers which cannot be matched. The shortage of lawyers with the right experience and leadership capabilities has put pressure on GCs to offer higher compensation in order to acquire and maintain the right talent to serve the business. An increased attention to diversity has made hiring even more challenging as the competition is fierce. Since legal and business issues are more complex than ever, GCs need to create solutions when throwing more bodies at a problem is not a possible option.”
Then there is the matter of legal operations, such as streamlining the law department and improving efficiencies. “With concerns that the law department may be perceived as a cost center vs. a profit center, GCs are focused on improving efficiencies through the implementation of technology (AI, contract management systems, etc.) and showcasing the law department’s value and ROI through metrics using language to which the business partners can relate,” said Mr. Gilmore. “Fostering lawyers to both earn the trust of the business and be viewed as a strategic advisor is a daily ritual.”
Finally, what keeps GCs up at night is the unknown. “The GC is required to expect the unexpected,” Mr. Gilmore said. “However, many GCs feel understaffed, and missing a small detail involving privacy and security, government regulations, ethics and compliance, litigation, IP, diligence on an impending transaction, etc. can be detrimental.”
John Gilmore is co-founder and managing partner of BarkerGilmore, which specializes in building corporate legal and compliance teams. With a network of advisors and recruiters spanning the U.S., BarkerGilmore consistently places talent at leading consumer, energy, financial, healthcare, industrial, and technology companies. Mr. Gilmore has over 30 years of executive search experience. He has developed trusted relationships with general counsel and C-suite leaders across the country. With an institutional understanding of how in-house legal and compliance departments function most effectively, Mr. Gilmore has earned a reputation as one of the top executive search consultants for general counsel and chief compliance officer placements
As the Equilar report details, general counsel pay has seen a respectable and deserved increase in recent years. From 2017 to 2021, the total median GC compensation of the Equilar 500 rose 25 percent from $2.474 million to $3.088 million. “GC compensation from 2019 to 2020 was flat, and understandably so given that COVID had caused so many uncertainties,” Mr. Gilmore pointed out. “Companies responded in 2021 by increasing stock awards by 27.9 percent. Cash performance awards grew by 19.4 percent. Feedback from business partners has shown value combined with the availability of compensation market data have enabled more frequent and productive compensation discussions between the CEO and compensation committee. Additionally, as hiring manager, the rising compensation for members of law departments has also increased GC compensation.”
While the high compensation associated with GC opportunities is attractive, it ultimately is not the primary consideration for recruited candidates, said Mr. Gilmore. “A collaborative leadership team, sophisticated board, ability to make an impact on the business, passion for the product or service offered, strong company culture, and opportunity for future growth are the key components necessary to motivate a general counsel to join a company,” he said. “While it is important to be compensated fairly and in line with others on the executive team, total compensation rarely impacts our ability to attract a diverse slate of top candidates for any GC search.”
For general counsel who are women, progress has been something of a mixed bag. Their numbers have been up in recent years, the Equilar report showed, but 2021 saw some disappointments. “Despite making apparent strides toward gender parity over the last five years, progress seemingly stalled in 2021, with the percentage of women GC remaining flat from 2020,” said the study. “This makes 2021 the only year during the study period without positive growth in the representation of women, in line with the overall number of GC among the NEO (named executive officer) population.”
“Despite higher total direct compensation at the median for general counsel overall, median pay to women in the role actually fell slightly in 2021, the second instance of negative growth in the five-year study period,” said Equilar. “2020 had seen female GC in the Equilar 500 out-earn their male counterparts for the first time, with median total compensation of $3 million compared to $2.8 million for male GC. By contrast, women in the role took home slightly less than $3 million at the median in 2021, compared to $3.1 million for men.”
Median compensation for female GC lagged that of male GC in every year studied except 2020, with women earning 5.9 percent less than their male counterparts on average during the period, said Equilar. In total, compensation to female GC has grown 30.2 percent since 2017, while compensation to men has grown 22.6 percent.
Closing the Gap
“Diversity is a priority for most companies; however, the role is only filled with a lawyer who is well-equipped to serve as a member of the senior leadership team,” said Mr. Gilmore. “Today, 35 percent of Equilar 500 general counsel are women compared to 23 percent in 2017. Succession planning is a priority for good GCs. As women and other underrepresented lawyers are promoted or hired into leadership roles in the law department and groomed to become GC, this gap will close further.”
2022 General Counsel Compensation Report
Over the last several years, the role of general counsel has established itself as one that is heavily relied on by boardrooms and C-suites across Corporate America. General counsel are known to bring a high level of emotional intelligence and invaluable legal knowledge to the table, particularly during turbulent and controversial times.
This report examines general counsel compensation at public companies and the critical nature of the GC role and how companies are recruiting and compensating top legal talent. Download now!
For Mr. Gilmore’s firm in particular diversity has long been top-of-mind, and a source of pride. “BarkerGilmore has been committed to diversity since the company’s inception,” he said. “In 2021, 69 percent of all placements made by the firm were women or underrepresented lawyers. The firm actively supports most legal affinity groups, and many members of the advisor team have served on the boards of these organizations.”
In the Equilar report, Mr. Gilmore was asked in a Q&A to look to the future. What some of the factors were that might impact compensation for general counsel in the near term and how that would affect the recruiting perspective? Continued inflation and a potential recession would no doubt negatively impact annual cash bonuses and long-term incentive awards, Mr. Gilmore said. But as critical members of the senior leadership team, the general counsel position cannot go vacant.
“The demand for general counsel will persist even in an economic downturn,” he said. “However, there would be a reduction in hiring activity for specialized mid-level and senior counsel-level lawyers. As these positions are vacated due to resignation or retirement, and companies are faced with headcount reduction, replacements can be put on hold. Other in-house lawyers will be tasked to complete the work left behind and/or outside counsel will be engaged.”
Partnership and Alignment
Mr. Gilmore has worked as an executive search consultant through three recessions—1990, 2001, and the financial downturn from 2007 to 2009—and says the recruiting process for executive-level leadership remains consistent and disciplined. “The critical element to attracting top talent is an understanding of the long-term opportunity,” he said. “Since successful general counsel are forward-thinking, attracting an exceptional finalist is never a problem, in good times and bad. A collaborative leadership team, sophisticated board, ability to make an impact on the business, passion for the product or service offered, a strong company culture and opportunity for future growth are the key components necessary to motivate a general counsel to join a company. While important to be compensated fairly and in line with others on the executive team, money is most often not the attraction.”
“Executive search consultants are relied upon for access to unmatched networks of diverse talent and finely tuned assessment capabilities to ensure a finalist is equipped to serve as a strategic advisor and will thrive within the company culture,” he said.
Even if an internal successor is prepared to take on the role, CEOs and board members insist on benchmarking this candidate against outside talent. “There are remarkable, business-minded lawyers out there, and it pays to consider all options,” said Mr. Gilmore. “The partnership and alignment between an executive search consultant and the client making the hire is imperative to a successful outcome. The short answer to your question is: We are not predicting a downturn in the need for general counsel in the year ahead.”
Contributed by Scott A. Scanlon, Editor-in-Chief; Dale M. Zupsansky, Managing Editor; and Stephen Sawicki, Managing Editor – Hunt Scanlon Media