Articles Posted in Talent

The International Legal Technology Association (ILTA) released the results of its 2008 Law Department Survey of 45 law departments.

On page 5 a table lists eight technology roles. For each of them around 20 of the respondents had one or more people in the following roles: project managers, application developers, infrastructure personnel, data specialists, database administrators, report writers, helpdesk, and trainers.

Most of the respondent departments are big. Sixteen have 11-50 lawyers, ten have 51-100 lawyers and 16 have more than 100 lawyers, but even so these are still sizeable numbers for technology staff. In reality, some of the roles may not be full time (See my post of Sept. 10, 2005 on the multiplicity of law department positions; April 30, 2006 #6: procurement manager; and Aug. 4, 2008: head of knowledge management.).

Data in InsideCounsel, Jan. 2009 at 52, covers compensation from the Thomson Hildebrandt 2008 Law Department Survey. One of the charts shows median total cash compensation from a survey population of more than 220 law departments by seven areas of legal practice (See my post of Feb. 12, 2009: cash comp by specialty.). Since I wrote about this survey’s comparable data almost two years ago (See my post of April 8, 2007: compensation for legal specialists in-house.), I decide to match the compensation levels for the four specialties that were in both reports, putting the most recent data first.

Patent litigation ($263,080 vs. $209,900, a 25.3 percent increase)

M&A ($240,050 vs. $221,500, an 8.4 percent increase)

Data in InsideCounsel, Jan. 2009 at 52, covers compensation from the Thomson Hildebrandt 2008 Law Department Survey. One of the charts shows median total cash compensation from a survey population of more than 220 law departments by seven areas of legal practice.

Patent litigation ($263,080)

M&A ($240,050)

No headline, really, about Samsung Electronics, appointing its first-ever European general counsel. If, however, you read the announcement in Corp. Counsel, Vol. 16, Feb. 2009 at 52, you might raise an eyebrow. Since February 2008, a secondee from Eversheds coordinated the company’s 14-lawyer in-house team in Europe. That lifts the eyebrows a bit, but they leap when you learn that John Benjamin was an associate.

Most of the instances on this blog of secondments are for filling relatively junior roles. To serve most of a year as the European general counsel for a huge Korean conglomerate certainly wins the prize for most responsibility by a secondee (See my post of Jan. 23, 2008: secondees with 8 references.).

An excellent article in Directors & Boards, Vol. 33, Fourth Quarter 2008 at 42, explains why general counsel might want to negotiate a personal indemnification agreement before they take the helm. Corporate bylaws may fall short of protecting them in the event of a claim and D&O insurance has holes. The author, Priya Cherian Huskins at Woodruff-Sawyer & Co.,
recommends supplementing those protections with personal indemnification contracts, especially those that accelerate when legal fees are advanced to the indemnitee.

As I read the article, I wondered how much companies spend under indemnification agreements and whether those outside counsel fees are included in the budget of the law department.

A survey gave respondents four choices to pick as the primary factors that limited the number of employees they could hire. By far the biggest restriction is “budget,” which 62 percent of the nearly 200 respondents chose. This could mean that their budget did not allow any additional compensation spending, or it could mean that they were not able to offer a sufficiently attractive compensation package.

The next most common limitation was “headcount restrictions,” selected by 29 percent of the respondents. Some 7 percent chose “availability of talent.” Apparently, they could not find the right person for it position.

The oddest and smallest obstacle was “business limitations,” which 2 percent of the respondents chose. Perhaps “headcount restrictions” means a company-wide hiring freeze or an absolute ceiling on the number of employees in the legal department. Perhaps “business limitations” means that there is not support from a business unit to add another lawyer whose costs will flow to that unit.

The Small Law Department Compensation Survey conducted by the ACC and Empsight,includes in the term “LTI Valuation” (long-term incentive) three elements: the value of stock options, the value of restricted stock awards, and any long term cash awards. The survey report uses the Black-Scholes methodology to calculate the value of stock options (See my post of Nov. 25, 2006: stock options with 11 references; and Aug. 12, 2008: stock options.). It then simply says it uses “the value of Restricted Stock awarded.”

Maybe there is a calculation method for restricted stock, but surely they cannot simply use the market value of stock on the day the stock are awarded, or the cut-off date of the survey (March 1, 2008). Restricted stock vest on different schedules, such as one-quarter each year for four years, and since who knows what the future value will be, the valuation of such an award must be difficult. Unless, that is, Black-Scholes or some similar formula also applies (See my post of Jan. 17, 2006: Black-Scholes formula; July 27, 2007: the lattice-binomial method of valuation; Jan. 24, 2006: software to calculate the formula; and July 25, 2007: the binomial method.).

Many people argue that awards of restricted stock are better than grants of stock options, because people must act to realize gain on options and options can lose all value. Restricted stock can’t become worthless

During my legal consulting projects I have seen instances of this with people who review marketing and promotional literature, with compliance staff, with documentation specialists, with technical staff, and with contract administrators. A lawyer supervises their work, but their headcount and costs remain on someone else’s org chart and budget (See my post of Jan. 15, 2009: business units sometimes provide headcount for free.).

In the end, it does not matter who pays for a person or claims them on their rolls. What matters is how well they are led and managed.

The Small Law Department Compensation Survey, conducted in the summer of 2008 by ACC and Empsight, reports on data from approximately 340 law departments. According to a sidebar and chart in the ACC Docket, Vol. 26, Nov. 2008 at 8, the base pay of a general counsel with 1 to 2 staff is 25 percent higher than the base pay of a general counsel with zero staff. As compared to that zero staff level of base pay, a general counsel with 3 to 4 staff is 35 percent above; with five or more staff, the pay escalates to 75 percent more.

What that means to me is that if the average (or median) solo general counsel makes a $200,000 base, then the next department-size level up makes $250,000 (a quarter more), add a staff person or two and base climbs to $270,000, but the base jumps at five or more staff to a princely $350,000.

It would be useful to have a bracket for general counsel with 6 to 12 lawyers (See my post of Dec. 27, 2008: small law departments are 1-5 lawyers; and Dec. 29, 2008: medium size departments are 6-12 lawyers.). The pay premium stands out so much for the five-plus group that you wonder whether a few general counsel from relatively large departments skew the average. Unlikely, because the website states that the survey “Targets companies with revenue of $1 billion or less and 10 or fewer attorneys.”

“The first lawyers Microsoft tends to put on the ground overseas are commercial attorneys that negotiate contracts and provide basic legal advice.” To address the meat-and-potatoes of what’s on the in-house table makes good sense. Because of that front-line need, the article makes the point that multinational law departments put much more weight on experience than on education. And the best kind of experience shows up as education in the foreign country, then time spent working in a law firm in the United States, Britain or Australian, then experience in a law department in the country.

“All legal counsel should also be familiar with and understand the US regulatory framework, including Sarbanes-Oxley and the Foreign Corrupt Practices Act,” according to the ACC Docket, Vol. 26, Nov. 2008 at 50. So the best combination is an experienced, local transactional lawyer who knows the linchpins of US law that apply to US companies doing business abroad.

Several posts on this blog had traversed topics on overseas lawyers (See my post of June 15, 2008: US companies with significant foreign revenue have many overseas lawyers; Nov. 16, 2008: five questions to ask when deciding on first overseas lawyer *6; Nov. 16, 2008: staffing options other than hiring an overseas lawyer *7; Dec. 11, 2008: secondments back to headquarters *; Aug. 21, 2005: lower cost lawyers overseas; and Jan. 11, 2009: six reasons to hire overseas.).