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Corporate Governance

Male Legal Group Leaders Still Top Paid, Despite Recent Pay Cuts (1)

April 21, 2020, 4:52 PMUpdated: April 21, 2020, 8:55 PM

Men continue to earn more than women working in the same in-house legal positions, while corporate counsel in the U.S. are paid significantly more than their counterparts overseas, according to a new survey conducted by legal consultancy Major, Lindsey & Africa.

At U.S.-based companies with more than $10 billion in annual revenue, male law department leaders earn 49% more than their female colleagues, according to MLA. The legal search firm found that male GCs and CLOs at those companies averaged more than $1.11 million in total cash compensation, much of it in the form of bonuses, compared to $739,436 for females in similar roles.

“What the data obviously reflects is that we’re not there yet—women are still getting paid less for doing the same work,” MLA’s in-house counsel recruiting leader Lee Udelsman told Bloomberg Law.

Melba Hughes, national in-house diversity practice leader at MLA, said that some of the disparity in pay can be explained by the fact that there are simply fewer women law department leaders than there are men.

Hughes and Udelsman noted that initiatives to increase the number of women in top in-house legal roles are laudable, and hopefully within a few years can help level the pay playing field.

MLA based its first-ever in-house pay analysis, conducted in partnership with business advisory firm Western Management Group, on responses it received from 3,900 chief legal officers, general counsel, chief compliance officers, and other legal department levels in 36 countries. Respondents were polled last year—before the coronavirus took a hatchet to some in-house pay packages.

MLA’s analysis found some exceptions to gender pay inequity. The gap between men and women at the top narrows as a company’s gross revenue decreases and as one moves down the in-house corporate ladder. On a global scale, women in mid-level positions such as regional and country general counsel, as well as assistant and deputy general counsel, reported more total cash compensation than men.

Imbalance Abroad

Udelsman said he was surprised at the survey’s finding that top in-house lawyers in the U.S. earned 45% more on average than those elsewhere around the world, a disparity he attributed to “how lawyers are viewed differently” outside the U.S.

At many European, Middle Eastern, and Asian companies, GCs and CLOs continue to report to the CFO, according to MLA’s report. Such reporting lines often have a direct impact on both the effectiveness of the top in-house legal role and its compensation, the report found.

Reporting directly to a CEO and being part of an executive leadership team is more common within the U.S., Udelsman said.

The Asia-Pacific region was an outlier, as female law department leaders averaged $437,428 in pay, outpacing the average $385,884 earned by men, according to MLA. The consultancy considered these numbers an anomaly because in Asia, many households have in-home child care, possibly allowing women to return to the workforce quicker and have more of an equal footing with their male colleagues as compared to Western countries.

Law department leaders in the Asia-Pacific region earned an average $383,782 in cash compensation—13% more than the $338,376 reported by their EMEA counterparts.

Nearly two-thirds of the roughly 1,400 law department leaders that answered the pay portion of MLA’s survey were male.

Other Key Findings

Law department leaders in highly regulated industries worldwide like banking, financial and professional services, and agriculture reported higher average cash compensation—at $725,970; $617,018; and $609,720; respectively—than those in non-regulated industries, according to MLA. Large, multinational agrochemical and biotechnology companies help bolster pay in the agricultural sector, the firm said.

MLA found that the education and government sectors, at a respective average of $350,018 and $218,980 apiece, brought up the remuneration rear. Within the U.S., legal chiefs working out of the largest cities like New York and Los Angeles generally earn more than those in other geographical areas, including smaller metropolitan regions like Denver and Miami.

The MLA survey didn’t measure equity stakes that have long been part of in-house compensation packages at startup and technology companies that dominate areas like San Francisco and Silicon Valley.

Potential Pay Rebound

Udelsman said he doesn’t foresee a long-term erosion in general counsel compensation stemming from the spate of coronavirus-related compensation cuts due to the critical role that many U.S. law department leaders are playing during the current crisis.

“They’re at the center of this thing putting in place business continuity plans,” said Udelsman, citing conversations he’s had with dozens of legal chiefs over the past month. “This will reinforce the value they bring to the legal function. General counsels are viewed as key members of the leadership team.”

The industries that have been most affected by such in-house compensation cuts—transportation, travel, and hospitality—have a large number of hourly employees that have been furloughed or subject to reductions in force, thereby necessitating a sharing of economic pain by executives at those companies, Udelsman said.

“Those cuts, as I understand it, are for a specific period of time,” and salaries should bounce back once shutdowns in those industries end, he said. One caveat is what the second and third quarter financial earnings of companies look like as business restrictions stemming from the Covid-19 pandemic are lifted in certain parts of the U.S.

“Most companies had their first quarter baked before we had shelter-in-place orders,” Udelsman said. “I think pay cuts and freezes will be temporary, but we’re just going to have to see what the tail is on this thing.”

(Adds comments from Melba Hughes in third and fourth paragraphs.)

To contact the reporter on this story: Brian Baxter in New York at bbaxter@bloomberglaw.com

To contact the editor responsible for this story: Seth Stern at sstern@bloomberglaw.com

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