Through my line of work, I’ve had a front row seat to the seismic evolution of the general counsel role in recent years. Today’s GC isn’t just a legal advisor and company watchdog. Rather, they’re a critical member of the executive team, playing a pivotal role in managing risk and shaping financial and business strategies. This increasing importance of, and demand for, the GC role can be attributed to numerous and wide-ranging factors, such as post-pandemic retirements, increasing and new regulatory requirements, economic uncertainties, global growth, and greater importance in signaling company values/morals.
This ever-expanding role has left executive teams questioning how to appropriately position their General Counsel within the organization. My reply is always the same: How much do you value your General Counsel and how do you show them that value? If they’re meant to be a bona fide strategic player—and you want a GC who will be a significant asset to your leadership team and organization, this question is critical. If you truly value your GC, here are the top factors you need to consider in order to demonstrate that value:
Compensation
Compensation is key. Compensation is a testament to corporate values. Yet that connection isn’t always clear. Many employers talk about how highly they regard and respect certain roles, but then lowball the full compensation package during the hiring process. This can come in any of the pay components – base, bonus, AND/OR equity.
While not an absolute rule, the CEO is typically paid the most, with the CFO next in line. From there typically comes the General Counsel, the COO, and the CHRO. If there’s a steep dip in compensation after the CFO, or the GC is compensated markedly differently than the rest of your C-suite, an unspoken hierarchy of importance is established. You send the message up and down that the GC is not valued in the same way as the rest of your executive team. This is particularly true in nonprofit/public organizations where compensation information is transparent and easily found in filings online.
And with pay parity under intense scrutiny right now, disparities in C-suite compensation are increasingly obvious. In 2022, CFOs were paid 50% more than GCs among S&P 500 companies. When taking into account that most CFOs are men (women make up only 15% of CFO positions) and almost half of General Counsel are women, this pay gap by occupation becomes even more apparent.
When seeking a GC who’s a true executive partner, your best bet is to put your money where your mouth is by aligning compensation with your broader C-suite.
Leveling
In the legal world, where you sit in the C-suite matters. For most lawyers, titles and leveling are indicative of career progress and a valid predictor of the respect they will receive within an organization. The right title also sets a candidate up for further advancement down the road. When you’re in the market for a GC, it’s vital to ensure the title of the role reflects both the scope of responsibilities and level of importance.
In my opinion, once again the answer is consistency. For instance, if everyone in the C-suite is a Senior Vice President but the General Counsel is a Vice President, it sends an unmistakable message that you view the GC as “less than.” Typically, in a public company, the General Counsel will be a Section 16 officer. A lower-tier level or leaving the GC off the public filings can also be detrimental to a GC’s influence within the organization.
Reporting Structure
The GC reporting structure continues to be a hot topic in the in-house realm. According to the 2023 Association of Corporate Counsel (ACC) Chief Legal Officers Survey, the vast majority (81%) of chief legal officers in the U.S. reported directly to the CEO of their organization. The rationale of this model is that it helps ensure the GC/CLO is perceived as a senior executive and key stakeholder in company decision-making.
A contrary, and minority, school of thought says it makes more sense for the GC to report directly to the CFO, referencing the close working relationship between the GC and the finance team. While the GC and the CFO do work closely together, this reporting structure raises some serious questions: Does it hinder the GC’s capabilities when they don’t have direct access to the CEO and board? Will a GC reporting to the CFO be able to have front-line involvement in mission-critical business decision-making? As with the title, does a skewed reporting structure send a message to the organization about the importance of the GC role?
Such a reporting structure can be an especially big red flag when the GC is the only C-suite member to whom it applies.
Prioritize Value-Setting Conversations
Attracting premier candidates means showing that your company perceives the GC as a significant and equal player with a seat at the table. Providing the appropriate compensation, level, and reporting structure goes a long way in reinforcing this message. With any one factor out of alignment, the quality of the candidates you will receive will likely be skewed. Companies are more likely to see candidates who don’t have GC experience and are looking for their first GC role. They may have less experience overall and are willing to trade something in order to get their first shot. Consider the above factors carefully as you craft what you are looking for in your General Counsel.
The real issue, of course, is how to create these changes in an organization where GC compensation is deeply rooted in legacy hierarchy models. It requires value-setting, leveling conversations among CEOs, CFOs, board members, and others on your compensation committee, with input from legal recruiters who are privy to the current market. Having these important conversations now can help you create a more consistent and fair approach to executive compensation. This, in turn, will give you a serious advantage when searching for your next GC changemaker.
Remember your head lawyer is no longer simply consulting on finite legal issues. They have their hands in HR, IT, finance, and nearly every area of the business. They are expected to know the ins and outs of the business, not just as it pertains to risk and legal precedent. The GC’s role is vast, strategic, complex, and nuanced—and to hire the best who will develop the most value for your organization, you need to show them they are valued.
