The 2013 GC Compensation Survey

After a couple of rough years, top company lawyers get a raise.

, Corporate Counsel

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Top 100 List
A compensation breakdown for the top 100 in-house earners.

Industry Break-Out Charts
Which were the best industries for GC compensation packages?

Nos. 101-180
These GCs didn't make the top 100, but they made out pretty well.
 
Methodology
How we made the GC Compensation Survey happen.
 
Fortune 1000
A sortable list with extensive GC compensation data.
2012 GC Comp Survey
Compare last year's survey with the 2013 results.


General Electric Company didn't mince words in its most recent proxy statement. Summing up general counsel Brackett Denniston III's performance, it says: "Mr. Denniston had a strong year in 2012."

It must have been a very strong year indeed. In fact, Denniston, GC of the Fairfield, Connecticut–based company since 2004, took home $10.9 million in total cash compensation in 2012. After a three-year absence from Corporate Counsel's GC Compensation Survey, Denniston returned in style— finishing ahead of the year's other 99 highest-paid legal chiefs.

He's not alone. There can be just one winner, but there was plenty of good news to go around. After across-the-board declines the previous year, compensation bounced back up in 2012 in every category of GC pay that we measure. Average total cash received rose 6.7 percent to $1,853,671, which is the highest figure we've seen to date. (Note: highest since 2000, anyway.)

What's the explanation?

Aaron Boyd, head of research at executive compensation analysts Equilar Inc. in San Francisco, says, "A lot of it has to do with the fact that the economy continues to chug along and to perform better and better—at least as far as the stock prices are concerned." The stock market posted double-digit gains in 2012, and in a more stable environment, he says, executives were able to hit their targets. So long as their companies were thriving—and many were—it was a good year to be a GC in America.

Let's break down those beefed-up general counsel pay packets into their component parts.

The average stock award increased a whopping 64.8 percent, to $2,350,219, after a 10.9 percent decline in last year's survey. Speaking of good years, Apple Inc.'s Bruce Sewell can take most of the credit for the drastic swing. He received a $66,571,750 stock grant in 2012.

Boyd has seen more companies shifting compensation away from cash and toward equity in an effort to align pay with performance. Apple is a prime example. In its proxy, the company stressed a strong preference for long-term equity awards over other forms of compensation. The company has no long-term cash bonus program, no "golden parachutes," no employment or severance agreements of any kind. Its stated philosophy is that the "executive compensation program should be simple and directly linked to performance." Apple's stock bounced around quite a bit last year, the first full year of operations after the death of cofounder Steve Jobs. But the electronics giant met its performance goals and doled out awards to its executives accordingly.

And what about once-lucrative option awards? Even they are doing better, if not anywhere near their historic levels. Last year's average increased 21 percent, to $888,313. But some of the GCs on this year's survey were in-housers back when the option was a real prize. In 2000 the average award was $4,217,566. Boyd says, "That has been an equity vehicle that's been falling out of favor with a lot of companies, as they're looking to give more value in stock awards." The trend, he says, is to move toward performance shares.

At the risk of sounding repetitive, the reality is that it's now a pay-for-performance world. Any general counsel who wants to earn those megabucks is going to have to jump through a few hoops first. Meeting goals is a given. Now, if they're among the company's top five earners, their compensation package will be subject to say-on-pay as well. Todd Sirras, managing director of executive compensation consultants Semler Brossy in Los Angeles, says a "new normal has been established" as far as shareholder input is concerned.

Three years into the nonbinding say-on-pay votes, which were created by the Dodd-Frank Wall Street Reform and Consumer Protection Act, most companies seem to be getting the hang of the practice. Sirras says, "There's a much better understanding on both the issuer side and the investor side about what the expectations are and the kind of analysis that will take place."

A simple majority is all that's required for passage, and according to Sirras, if you were to examine 100 of the lowest scorers from year to year, there would be very little overlap. Just three companies didn't get a majority for three consecutive years—Nabors Industries Ltd., Tutor Perini Corporation, and Kilroy Realty Corporation. At press time, 55 companies had failed their most recent vote.Now to examine some of the pieces of the compensation pie that really count. (We feature equity awards in our survey because they're a large component of the overall pay package, but our rankings are based solely on cash compensation.)

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Originally appeared in print as Recovery Mode

What's being said

  • jake

    i know a lot of my lawyer friends that will be happy of this raise

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