The two sides of awarding in-house lawyers bonuses based on business unit performance

InsideCounsel, April 2007 at 59, draws on several surveys of in-house compensation. At one point it cites one survey for the proposition that business unit performance is a fairly common determinant of bonus awards (See my post of April 8, 2007 for more on three other determinants of bonuses; and Jan. 15, 2007 for some weaknesses of bonus awards.). That proposition is cause for worriment.

To pitch bonus amounts for lawyers dedicated to a business unit substantially on their unit’s performance makes it harder to assign lawyers to troubled units, yet those are the units that may most need legal counsel. It causes bonuses to fluctuate irregularly and clobbers internal equity. Specialist lawyers who support multiple business units will complain and there will be tension.

But, when you bonus rises and falls with your unit, it does align the lawyer to the business unit’s fortunes, which has good and bad consequences. Good because lawyers may try harder when they have a stake in the outcome; bad because those same efforts may degenerate to loss of objectivity and spine – in-house counsel represent the entire corporation.