When more responsibility doesn’t mean more money

It must be galling for senior in-house lawyers on this side of the pond to see the packages on offer for leading GCs in the US. Of course, America is far ahead of other major jurisdictions in treating a career in-house as a serious option, and the greater litigation threat to companies means that chief legal officers are always likely to enjoy greater rewards than those on offer in the UK.

But the annual compensation survey from Legal Week sister title Corporate Counsel underlines not only the enormous gap between GC pay in the US and the rest of the world but also the extent to which it is growing. In 2007, bonuses at America’s top 100 best-paid GCs were up no less than 17% annually to hit an average of $1.1m (£559,000), a level which is roughly twice the average bonus of this group in 2002.

Bonuses and equity-based compensation have rocketed in the last five years as a stream of post-Enron regulation appears to have beefed up the compliance role of GCs. And while in-house lawyers like to complain about the upward-only direction of profits at law firms, for GCs at top US companies a similar logic seems to apply as remuneration grows with little relation to underlying company performance. As such, top GCs in the US have more than kept pace with dramatic increases with average partner profits at top US law firms; the average partner at Wachtell Lipton may earn nearly $5m, they are still outpaced by top GCs, who can earn more than $10m annually.

In contrast the plain fact for equivalents in the UK is that salaries and overall packages have moved little in recent years. Some in-house recruiters reckon the take-home packages for top lawyers have only risen by around 15% against five years ago, which is barely keeping pace with the UK’s average earnings growth.

Yet in the meantime, GCs here in the UK have had to cope with plenty of red tape, regulation and the introduction of the mammoth Companies Act. The depressing truth is that more responsibility is yet to lead to more cash.

alex.novarese@legalweek.com