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Great advice from The Lawyer Whisperer

October 28, 2018
Question

What are the Differences Between a General Counsel and a VP of Legal in a Private Company?

answer
Julie Q. Brush

In today’s corporate environment, the In House Legal Department continues to expand and executives are on boarding lawyers to their executive ranks earlier in the company’s lifecycle than ever before. For early, mid and late stage private companies, the top legal dog can take on different designations and assume different roles. As a company grows, executives assess the necessity of a dedicated lawyer and the level to which this individual will operate. Their conclusion will influence several variables including compensation, reporting structure, board access, responsibilities…and title.

Legal titling in these companies can vary. If a company is adding a lawyer who is fairly junior (i.e. 6 – 10 years legal experience) and who will serve as a commercial/tech contracts blocker and tackler, s/he will typically possess the title of Corporate Counsel, Senior Counsel or Director. There will be no Board interaction; and reporting structure will either be to the CFO or other lower level executive. Compensation (base, bonus + stock) will mirror that of similar titles in the marketplace.

When execs desire a higher-octane, more experienced profile, they will consider adding a General Counsel – or a VP of Legal. So what is the difference between these two titles and what influences executives in their selection of a particular title and level for their incoming lawyer?

Let’s take a look…

Executives will hire a “General Counsel” when one or more of the following circumstances exist:

  • The company is poised for a “near term” liquidity event
  • The company is rapidly scaling and expanding geographically
  • Legal issues are material and critical to the company’s success and/or survival
  • The executives want a business-oriented legal executive to add a sophisticated perspective to senior management and the board
  • The Board recommends and supports it

Executives will hire a “VP of Legal” when one or more of the following circumstances exist:

  • They want a slightly more seasoned lawyer to build the legal function, but one who will also handle all the blocking and tackling legal work
  • They do not want to offer a General Counsel level compensation package
  • They want this lawyer to report to someone other than the CEO
  • The company is in its early to mid stage and there is no liquidity event on the horizon
  • The Executives don’t believe they are ready for a General Counsel yet
  • They do not like lawyers, but know it’s in the best interest of the company to add one to the organization
  • They have had a negative experience with a previous General Counsel and want the new lawyer to earn his/her way in to the role.

This provides some background on the executive drivers for the type of hire. Below are practical differences between the two titles and levels:

General Counsel

The Profile: A General Counsel level lawyer in a private company will often possess prior General Counsel experience (private or public company). But sometimes s/he will be a higher-up at a high profile company like Google, LinkedIn or Amazon. S/he will have a broad based and diverse substantive background (which includes corporate governance) with prior Board and management experience. The number of years of experience typically ranges between 15-25+ years.

The Role: A General Counsel will report to the CEO (although in some companies, the lawyer may report to the CFO or CAO [but this type of reporting structure is diminishing in frequency]). This legal executive will manage all domestic and global legal matters for the company. A small legal team may already be in place, but if it is not, the General Counsel will have the authority to hire a lieutenant within six to eight months of the GCs start date. S/he will also have Board interaction and the proverbial “seat at the table”.

The Compensation: Compensation will mirror that of others in the executive ranks – in base salary, target bonus and stock grants (somewhere between the head of HR and the CFO). The stock will be measured in terms of “percentage of the company”. Employee benefits and stock vesting/priorities/change of control will also be aligned with senior management.

VP of Legal

The Profile: A VP of Legal will often possess a strong commercial/technology transactions background and will not have held a General Counsel title in the past. S/he may be a “number two” or more senior level lawyer in a large private or public company – or held a similar role/title in a private company. Typically, this lawyer does not possess Board or governance experience – and may or may not have management experience. The number of years of experience typically ranges between 12-15 years.

The Role: Also referred to as “GC Light”, a VP of Legal often reports to the CFO or other executive that is not the CEO. This lawyer is expected to block an tackle the plethora of commercial and technology transactions agreements that come down the pike week after week, month after month, quarter after quarter. S/he will also be tasked with building the infrastructure of the department. Board interaction is minimal and rarely will there be a team to manage. In addition, the executives do not consider this lawyer on the same level as the C-Suite and other senior ranking officials so s/he will not be included in company strategy or other highest-level decision-making.

The Compensation: A VP of Legal will not reach the heights of senior executive compensation. With this said, base salary and bonus are compressed so the gap in these areas between the levels won’t be astronomical. Base salary is $10k-$50k less than that of a General Counsel. Target bonus is between 0-30% whereas a General Counsel’s target bonus is between 0%-50%. It’s the stock grant where the largest disparity exists. Stock is not measured in terms of percentage of the company – or if it is, it is below .1%. Employee benefits will be aligned with other similarly leveled execs and there are no change of control provisions granted.

One trend that is starting to emerge is a hybrid role – a role that is in between a VP of Legal and General Counsel. For example, the title might be VP of Legal, but the role reports to the CEO, manages a team and has board exposure. Compensation may also hit General Counsel level cash with other senior exec benefits. Stock may also be higher and reach .2+%. And there may be a clear…and short path to promotion if the lawyer excels in his/her role. A General Counsel title/role may bring in a less experienced lawyer with no prior General Counsel experience, but who is paid less with narrower responsibilities. These deviations won’t be uniform and will depend on the executive drivers to make the hire. But it is a trend that is gaining steam as the market activity continues to be robust.

General Counsel vs. VP of Legal: Now you have your finger on the pulse of their differences…and their nuances.

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