A recent report shows the rate of salary increases for in-house legal counsel continues to slow through a rough economy. But in the big picture, lawyers aren’t starving.
Hildebrandt Baker Robbins, a New Jersey-based legal industry consulting firm, released a study this month that surveyed more than 6,000 attorneys across nine levels and more than 5,000 non-attorney staff on pay rates.
According to the 2010 survey, the average increase in total compensation for all attorneys was 5.5 percent. This was an improvement from the levels reported in the 2009 survey, which showed an average increase of 3.3 percent. But those numbers are lower than the pace of raises from 2004 to 2008 when they averaged 8 to 11 percent. While the percentage change in total cash compensation was higher in 2010 than in 2009, it was below historical rates of increase.
The average base salary for all attorneys was $159,000 in 2004. It peaked in the 25-year history of Hildebrandt Baker Robbins’ annual report at $179,000 in 2009. The average base salary reported in the 2010 survey was $174, 000.
The 2010 survey reported an average total cash compensation of $228,000 across attorney levels. Chief legal officers saw an average of 15.8 percent increase in total cash compensation compared to the prior year. The average total cash compensation for CLOs exceeded $1 million and bonuses made up nearly 45 percent of the average total cash compensation for CLOs.
According to the U.S. Census Bureau, the median household income in New York for a family with two incomes is $72,194.
“More than half of the companies in the 2010 survey implemented a salary freeze in 2009 as a cost savings measure,” said Lauren Chung, editor of the report. “Considering the recent data trends, the current market conditions and law department management practices geared toward cost savings, salary levels will most likely remain stable over the next few years.
At best, annual salary increases of 2 to 3 percent appear to be the new norm for in-house counsel, but we may see greater emphasis on variable pay, such as bonuses, for increased earning potential.”
A. Robert D. Bailey, general counsel for Bausch + Lomb Inc., said he’s not surprised to see salaries stalling, especially for in-house counsel.
“I get probably ten spam e-mails a day about this stuff,” Bailey said. “In-house counsel is like outside counsel, we have never operated with a blank check and the need to reduce and control costs is more present than it ever has [been] before. … I don’t think it’s a concern at all. The real story is the economy has stalled overall.”
Bailey said the rate of pay declining or changing in any way is attached to the economy. Companies are always looking to keep costs down, and that has been no different in his office.
“We have kept our budgets flat for as long as I can remember,” he said. “Our budgets change for matters that come up, but we’re constantly seeking to decrease the company’s core overall spending.”
Sharon Underberg, assistant general counsel and vice president in the legal department of Eastman Kodak Co., said her department has had layoffs and faces decreasing legal budgets.
“Legal departments don’t operate in a vacuum,” she said. “We’re not an independent entity. It really depends on economic factors and how they’re affected by the economy.”
She said the department looks for ways to become more efficient. One example is using Kodak’s contract management department. In the past, lawyers were spending too much time tracking expiring and ongoing contracts. They’re also looking to consolidate the number of legal firms they use for outsourcing and work out non-traditional billing plans.
“It’s challenging time. We’re asked to be doing more with fewer resources — both internally and externally,” she said. “It’s a balancing act. We’re doing our best to find creative solutions.”
Underberg said she’s not sure how raises will look next year.
“We’ll see what next year brings. Those decisions have not yet been made for next year,” she said. “Our compensations are determined on a broad basis, not just the legal department, but by the [human resources] department. That’s the track we follow. We rely on them to determine trends and see what the plans will be.”
The median company in the compensation report is one with 30 lawyers worldwide and more than $8 billion in worldwide revenues. The Hildebrandt Baker Robbins survey is unique among law department surveys in its continuity over the past 25 years and representation of larger law departments. The compensation data in the 2010 survey is as of March 2010, compared with the same period the prior year.