We’ve all been living in an out-of-focus world for the last two years, but one thing that is spectacularly clear is that the legal profession is more dynamic than ever. From the Great Resignation to the Great Compensation, the events that have unfolded during this unprecedented time in history have driven compensation into outer space with a straight shot to the Sun.
While a pragmatic mind would surmise that this trajectory could not possibly continue…Think again. There doesn’t seem to be an end in sight. For those seeking greener pastures, this is excellent news indeed. For employers, it requires a prescription for Excedrin.
So what are the current compensation trends? And what are the numbers right now…this minute…this second? Note: This article addresses compensation for the top legal executive in an organization. In subsequent articles, I will provide comp information for other levels in Legal.
First, the trends. Then, the numbers.
Across The Board Increases.
Base salary, target bonus and stock grants. All geographic regions. All levels. All up. Why? In a nutshell, the convergence of a thriving startup and IPO market, M&A, the increased value placed on Legal as a business partner, expanding legal departments and larger budgets to grow them and a tight candidate market have created fierce competition for talent that has driven up the money. While target bonuses have increased modestly, base salaries have increased roughly 15%-20% and stock grants have skyrocketed 25%-40% higher since pre-pandemic times.
Compensation Increases Every 12 Weeks.
Yep, you read that right. Every 12 weeks (give or take), compensation increases in some way, shape or form. Whether it’s a base salary increase or the presence of higher and more frequent signing bonuses, higher first offers or bonus plans offered for early startups etc. Whatever the change, compensation is shapeshifting every 12 weeks. That adds up to some pretty significant change over time.
Signing Bonuses Are Part of The Offer DNA.
It used to be a non-factor, then it was an exception reserved only for the most coveted candidates. Today, the signing bonus is one of the most frequently used strategic carrots that has demonstrated significant impact in pulling a desired candidate across the finish line. So if companies can’t…or won’t go higher on the base salary, target bonus or stock, they’ll sweeten the pot with more cash in the form of a signing bonus. And that usually does the trick. A fast-increasing number of employers aren’t even reserving the signing bonus for the negotiation, they are coming out of the gate with it. Today’s signing bonus numbers for GCs/CLOs range between $50k – $150k.
Startup Base Salaries Are Catching Up To Their Public Company Counterparts.
Once upon a time, if you joined a startup you took a fairly significant cash hit in exchange for the homerun potential of the stock. It was a roll-of-the-dice move that only the most entrepreneurial lawyers had the stomach to make. In addition to a void in the target bonus, base compensation was anemic compared to a startup’s public company counterpart. But that gap has closed significantly. For many years, companies like Facebook, Amazon, Apple, Netflix and Google (FAANG) were talent vacuums, sweeping up highly sought-after talent by dangling eye-popping compensation that was just too good not to take. Startup execs (and other public company execs) were fed up taking a beating in the talent-war…and fought back with higher base salaries, more stock, bigger titles and more diverse responsibilities. Today, startup compensation is as competitive as ever. Coupled with the other value propositions offered by these young Turks, candidates today are flocking to these opportunities in droves.
The Compensation Gap Among Different Geographic Regions Is Narrowing.
This gap has been slowly closing for the last four years but has accelerated since the “The Covid Recovery”. Pre-Covid, the compensation gap was 20%-25% between higher cost of living areas like the San Francisco Bay Area/New York and other U.S. cities (EMEA, APAC and LATAM had a larger gap). Today, that gap is between 0%-15%. What accounts for this trend? During the pandemic, many attorneys living in the higher cost of living regions moved to lower cost of living cities for higher emotional and financial well-being. Candidates were able to preserve their legacy compensation, which started bridging the gap. Employers seeking to hire this talent no longer had/have the luxury of paying “much less” to land them. In order to compete, they have had to increase compensation. In addition, the current shortage of good talent in the market has resulted in a significant increase in candidate leverage. So candidates in other geo regions are commanding a higher wage. I don’t know if we will ever achieve complete parity, but the needle is certainly moving in that direction.
Employers Are Being Proactive To Keep Their Employees.
Candidate mobility is at an all-time high and it has become increasingly difficult to keep employees in the chair. The biggest carrots to entice a move include more money, bigger title and more responsibility. One trend picking up steam over the last six months is employers circumventing the exploration of greener pastures by proactively awarding their employees with more money, a bigger job, better title or other things that make their lives a bit sunnier. Their motto: The best defense? A good offense!
Counteroffers Are A Given.
“Should I, or shouldn’t I?” That was the common muse about the counteroffer. And a modest percentage of candidates went through with the follow-up Ask. Today, asking for more in response to a job offer is automatic except in the rare circumstance where the initial offer blows the candidates socks off. In the current market, candidates are emboldened to ask for the moon – and many employers are coming close in delivering it.
Compensia And Radford Compensation Numbers Are Too Low For Lawyers.
This isn’t a trend; this has been true since the beginning of time. Compensia and Radford do not produce compensation surveys that accurately reflect current compensation for lawyers – in any geographic region at any level. This creates challenges in the corporate world because HR departments rely heavily on these types of compensation consultants/surveys to create and maintain their internal metrics for lawyers. When they don’t align with true market compensation (and they rarely, if ever do), it often sets the stage for a colossal clash between Legal and HR for attracting and retaining the best legal talent. More in another article on why they are so far off.
Now, The Numbers.
Below is current market compensation for the following top legal executive levels. There are outliers from these numbers, but these are the norm. For cities outside of the San Francisco Bay Area and New York, lower the figures by 10% -15%.
- General Counsel/CLO (startups and public companies)
- VP Legal/”GC Light” (for startups)
- Director of Legal/Head of Legal (for startups)
- Series A: $300k – $325k base salary, 0%-20% bonus, .7% – 1% stock
- Series B: $325k-$350k base salary; 0%- 30% bonus, .5% – .7% stock
- Series C: $375k – $400k base salary, 30%-50% bonus, .5% – .6% stock
- Series D, E, F+: $400k – $425k base salary, 30%-50% bonus, .5% stock
- Startups close to IPO: $400k – $425k base salary, 30%-50% bonus; value $4m – $6m stock
VP Legal or GC light: $285k – $300k base salary; 0 – 20% bonus, .07 – .2% stock
Director of Legal or Head of Legal: $250k – $265k base salary, 0 – 20% bonus, $400k – $650k stock value
Sometimes startups will provide a flat, guaranteed bonus if they do not have a formal bonus structure in place. Those bonuses for GC/CLOs range from $50k – 75k.
Signing bonuses range from $20k – $100k
Compensation will be influenced by the size of the company and industry. But here are the general numbers.
- Small public company – $425k- $475k base salary, 50% – 60% bonus, $1.8mil – $2.5m
- Mid-sized – $475k – $525k base salary, 80%-100% bonus, $3m – $5mil
- Large – $600k – $750k base salary, 100% bonus, $7m – $15m+
Signing bonuses range from $50k – $150k
PE owned companies are in their own category because compensation tends to be less competitive – in every category except the target bonus. Base compensation ranges are between 10%-15% below market to hovering around market (depending on the size of the company – see numbers above). Bonus is reliably strong at 50% (for GCs/CLOs), but the stock is reliably light. PE tends to benchmark “market” compensation with other PE-backed companies, which supports their world view of the latest and greatest. But these numbers are not really an accurate reflection of the entire ecosystem. So if you are negotiating a job offer with a PE-backed company, better eat your Wheaties.
A Note About FAANG (Facebook, Apple, Amazon, Netflix, Google)
Each of these companies is a market outlier on compensation. Meaning, they do not represent the market norm. They pay a tad above market on base compensation and are generally “at market” on target bonus. But it’s their stock that moves their compensation in the stratosphere, throwing off up to several hundred thousand dollars a year in cash earned from vested RSUs. So for those of you seeking to benchmark market compensation with your friends and colleagues at FAANG, keep this in mind and manage your expectations accordantly, as their compensation will not truly represent the market as a whole.
Our wild ride on Mr. Toad continues, but with a solid year behind us that demonstrated strong market activity and consistent compensation trends, we have a clearer window in to what we can expect for the year to come: more hiring, more mobility…and more money.
These trends and compensation numbers are a snapshot of where we are today and at this moment. They can and will change. Just how much will remain unknown…until we meet again.