The Wall Street Journal: Lawyers’ In-House Roles Grow With New Regulation

Originally Published in The Wall Street Journal | November 5, 2012

For generations of lawyers, the clearest path to success was landing a plum job at a big law firm.

But with fierce competition for private-sector jobs and client work shriveling, in-house work holds more allure as companies that face mounting legal and regulatory risks rely on—and reward—their own teams of lawyers.

More general counsel are cracking the top ranks at public companies in recent years, with some elbowing aside operations executives for a place among the five highest-paid positions disclosed in proxy statements.

The gains come as general counsel are taking on a more strategic role at some companies, working directly with chief executives on business goals as well as legal issues and mapping out future risks.

“Sometimes the GCs will be paid more than the president of a business unit,” said Cynthia Dow, an executive search consultant for Russell Reynolds Associates Inc., which has helped fill top legal posts at Walgreen Co., WAG -1.03% Archer Daniels Midland Co. ADM -0.78% and NRG Energy Inc. NRG +0.42% “Or if not, you’ll see them among that top 10, in the more highly regulated and sophisticated companies.”

The biggest rewards go to in-house lawyers with a seat at the management table.

According to a report to be released Monday by compensation researcher Equilar Inc., the median pay for general counsel who report directly to chief executives was $1.55 million—more than twice that of those further down the corporate hierarchy, whose median pay was $760,000.

The best-paid lawyers are at companies with more than $20 billion in revenue, where general counsel’s median pay was $2.76 million, according to the report.

General counsel pay increased at a faster rate in 2011—12.8%—than that of CEOs and chief financial officers, whose median pay grew at 6.2% and 8.9%, respectively, according to Equilar.

Meanwhile, companies are beefing up their compliance teams, often filling top posts with former prosecutors and attorneys who may have represented big companies but have limited in-house experience. These internal programs seek to identify corruption and other problems before regulators do, and can serve as insurance policies to limit fines and other penalties. Some operate independently of in-house legal departments, although collaboration is the norm.

“The growth and the job security is, for better or worse, in compliance,” said Cameron Findlay, general counsel for medical technology company Medtronic Inc.MDT -0.04%

From new rules governing financial services to legal questions surrounding privacy and social media, big companies are grappling with legal issues that didn’t exist 10 years ago.

Many also are doing more business in emerging markets, which can present challenges as companies navigate unfamiliar cultures and laws.

A surge in U.S. enforcement of the Foreign Corrupt Practices Act, which bars companies from paying bribes overseas, has led many companies to ramp up internal programs aimed at preventing employees from making improper payments to foreign officials.

Last month Wal-Mart Stores Inc., WMT +0.09% which is undergoing a federal investigation into allegations of bribery at its Mexico unit, hired Washington, D.C., attorney Jay Jorgensen to lead its revamped global compliance program. Mr. Jorgensen, now a litigation partner at Sidley Austin LLP, will join the company in December. He didn’t respond to requests for comment.

Wal-Mart has spent $30 million to review its world-wide compliance program, and another $51 million to investigate the bribery allegations. A spokesman said Wal-Mart “takes compliance with all laws around the world very seriously” and that the company is “working hard and dedicating considerable resources to enhance our global program.”

The compliance stakes are higher than ever. Since the passage of the Affordable Care Act, regulators have more aggressively gone after health-care providers and pharmaceutical companies suspected of committing Medicare or Medicaid fraud.

Meanwhile, the Dodd-Frank financial law passed in 2010 created new worries for in-house legal departments by providing financial incentives for employees to approach regulators with evidence their employer committed securities violations.

Nearly half of the 48 executives polled at a compliance forum in Florida last week said they added compliance staff in 2011, and that their budgets had grown in 2012 by a mean increase of 6.8%, according to Consero Group LLC, which organized the conference.

Those shifts have piled new responsibilities on top in-house lawyers. “There is a greater degree of judgment and agility that these folks need to bring,” said Ms. Dow of Russell Reynolds Associates. “Now there’s a much more pivotal role because of the complexity.”

But those lawyers also face greater risks, as regulators target in-house counsel during criminal investigations.

In 2010, Lauren Stevens, a former associate general counsel for GlaxoSmithKline GSK.LN +1.73% PLC, was indicted on four counts of making false statements to the Food and Drug Administration. She was ultimately acquitted by a Maryland federal judge who said she never should have been prosecuted in the first place.

That has prompted some attorneys to take a closer look at liability coverage and other ways to protect themselves when they take in-house jobs, said Veta T. Richardson, president and chief executive officer of the Association of Corporate Counsel, a trade group for in-house lawyers.

“Sometimes it feels like we have a target on our back,” Ms. Stevens told The Wall Street Journal last month.

—Joe Palazzolo and Joanna Chung contributed to this article.
Write to Jennifer Smith at Jennifer.Smith@wsj.com