Risk Averse In-House Counsel And Other Myths

The Wall Street Journal has an interesting article today about the “Asset Recovery” trend among many global legal departments. The article is here (that link may not work for everyone).

The “Asset Recovery” movement is an outgrowth of the “law department as profit center” mantra of a few years back. It has a lot of surface appeal. Companies should want to get what they are owed and defend intellectual and other property.

It’s not clear if this is a sustainable trend for all large law departments, or just a phase for mature companies to work through. Most fast-growth companies are too busy building top-line revenue to chase down every counterfeiter or errant supplier with a lawsuit. There are other ways to deal with these problems. (And no, I am not talking about self-help, but it has crossed my mind once or twice).

What caught my eye, however, were these throwaway lines later in the article:

Such efforts involve a big change in emphasis for in-house lawyers, who have tended to be risk-averse and mostly focused on shielding their company from lawsuits. Most in-house lawyers make significantly less than partners at major private law firms, many of whom earned $1.5 million or more last year.

Two thoughts.

1. The in-house lawyers as risk-averse myth. Just because all in-house lawyers don’t file lawsuits at the drop of a hat doesn’t make them risk-averse. It can actually make them prudent and not succumbing to hubris in the short run to curry favor with senior management and the board. Some lawsuits filed with much fanfare in the heat of some corporation vs. corporation dustup get settled quietly much later, often right before the depositions of the senior management. Reporters who cover the legal field should also understand something else. In-house lawyers are playing with company money. Outside counsel are playing with other people’s money. It is very convenient to talk tough and fight hard at $750 per hour. If you want to talk risk-averse, look closely at how some large law firms document deals or staff litigation. I don’t know where this clanger of a comment came from, it wasn’t attributed to anyone, and sounds more pertinent to a tabloid op-ed piece that a WSJ article.

2. The in-house lawyers make significantly less than partners at major private law firms myth. The first thought on this: so what? The second: who cares? The third: what’s the point? The relevant comparison, if it could be made pertinent to the theme of the article, would not be the earnings of a random in-house counsel with a major law firm partner. It would be between a CLO from one of the companies profiled and the average large law firm partner. Not sure about the partners, but one of the companies profiled likely pays their GC in excess of $3 million annually in total compensation. For each of the GC positions mentioned in the article, I bet I could find 1,000 large law firm partners who would take that job. In a heartbeat.

I am sure some in-house counsel are averse to risk, particularly of the unacceptable variety. I also know that some outside counsel are well paid.

For now.