ParfumGigi@aol.com

Julie Goldberg
GC California Magazine
November 29, 2006

In an era of increased regulatory scrutiny, the need to attract and retain premier legal talent has never been greater. But rising law firm salaries can make that difficult. In order to compete in this climate, companies need to think creatively about the compensation, advancement and lifestyle options they offer. Looking beyond salary can provide the edge businesses need to woo top-notch talent.

With the exception of top-tier law firms that pay starting salaries around $150,000, companies hiring junior to midlevel in-house attorneys have demonstrated that they can compete with outside firms. Public corporations, suddenly sexy hedge funds and the private equity world are particularly adept when it comes to this competition.

The crunch for companies hits when they are looking to hire attorneys seven or more years out of law school. For lawyers who are on a partnership track at their firms, the upward compensation trajectory grows enormously. By contrast, in-house base salaries hit a plateau in the midlevel attorney category. This means companies have to struggle to keep pace.

Still, many corporations are making inroads into the pool of elite lawyers who command top compensation and plum jobs. They're doing this by offering benefits that law firms cannot. In just the last year, J. Michael Luttig gave up his life tenure position at the 4th U.S. Circuit Court of Appeals to become general counsel at Boeing Co. Beth Wilkinson, one of the federal prosecutors on the Timothy McVeigh case and later a partner at Latham & Watkins, took the top legal slot at Fannie Mae.

By creatively exploiting the differences between corporate and law firm structures and culture, companies can attract some of the best and the brightest. What kinds of tools can corporations use?

Long-term incentive plans: This type of compensation is generally tied to an indicator of corporate financial performance. It serves as a long-range reward for an employee who is seen as instrumental to that improvement. These plans usually have stated sets of criteria that must be met before participants are eligible for an award, whether it is cash or equity. These criteria include earnings per share, corporate cash flow, market performance and the company's stock price.

Equity awards: Additional award plans can focus solely on stock or option awards that are often tied to annual target bonus plans. This type of award provides employees with considerable potential for wealth accumulation and is clearly not available at law firms. An increasingly popular tactic lately is offering equity through restricted stock units. Prospective candidates tend to see this as a more secure form of remuneration than stock options.

Incentive bonuses: Generally made in cash, these bonuses reward employees who help a company navigate through a crisis or a particularly complex litigation or acquisition. Because of the different economic models of law firms and corporations, law firms historically have not been able to incorporate this type of performance incentive into their compensation practices for salaried attorneys.

Signing bonuses: Other than full guarantee packages, which are sometimes used to attract lateral partners, law firms have stopped using signing bonuses. As a result, this is an area where corporations can compete to attract outstanding candidates. In trying to attract legal talent in hot legal practice areas, the up-front cash offered in a signing bonus can help offset a reduced base salary.

Retirement plans: Such plans come in various forms and are a critical aspect of corporate compensation. Companies can include a variety of components such as profit-sharing arrangements and employee stock ownership plans.

Management opportunities: Law firms are, for the most part, very flat organizations that offer very few opportunities to join the ranks of management. By contrast, corporations generally have more paths to leadership positions. These include advancing through the ranks to become general counsel, joining the operational side of the business or moving into related functions such as compliance and ethics. Many companies have elevated the importance of positions such as chief compliance officer and chief of ethics. These positions increasingly report directly to the company's CEO or CFO.

Another route that in-house lawyers are using to reach the C suite is to join corporate M&A departments. These jobs tend to be viewed more as strategic roles than technical support.

Additional perks: Don't overlook the things people typically think about when they hear the word "perk." Companies can offer a range of benefits, including on-site child care, temporary leaves, club and gym memberships, and company cars. Although law firms are beginning to offer some of these goodies, they are far more firmly established in the corporate world.

Hours: Although in-house lawyers put in long hours, their schedules have one big advantage over those of lawyers working in firms -- predictability. Do not underestimate the appeal of knowing that weekend and vacation plans will not be ruined. Work/life balance is now openly acknowledged as a factor in employment decisions, and top-notch lawyers demand time for life outside the office.

Once the right package has been assembled, there is one final hurdle for general counsel -- explaining to HR managers why these compensation tools are necessary. Staff who oversee the administration of salary and benefits may not understand that, unlike other functions, compensation for lawyers varies depending on industry, geography and the size of the talent pool relative to hot areas of the economy.

For example, there may be more competition for a mergers and acquisitions lawyer than for a commercial contract litigator. A lawyer's educational pedigree may command a higher compensation level than that of an equally experienced peer. Senior executives can play an important role in educating those in the benefits arena about the importance of compensation flexibility in bringing outstanding lawyers into the corporate fold.

Salaries at the largest and most prestigious law firms are always going to be an obstacle that corporations must contend with when it comes to courting outstanding lawyers. But with creativity and ingenuity, companies can make corporate life just as attractive.