SAFEGUARDS

Growing BusinessSAFEGUARDS

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  • When's the Right Time to Hire In-House Counsel
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    Compensation and Alternative Approaches

    In the first two topics, the “in-house counsel” role we’ve been discussing has been a senior position that’s basically a “General Counsel” or something similar. That would be a normal migration path for a company that had been using a law firm (or firms) to provide a variety of services. In many cases, a growing company’s need to raise capital by issuing securities is the catalyst that sparks the transition.

    But what if your company would like the benefits of in-house counsel, but can’t afford a General Counsel’s salary, which may be in the neighborhood of $250,000 per year? Experts say there are several good alternatives.

    First, if you really need an experienced general counsel, you can try to negotiate an alternative compensation plan that’s heavy on company stock and relatively light on salary. In effect, you are deferring compensation and, if your business is successful, the package could be far more rewarding for the attorney than the salary would have been. Here, you’ve got to be careful not to overpay. And definitely use a vesting schedule for any stock grants—otherwise future potential investors might view this one-sided commitment as a negative.
     

    The second alternative allows you to cut costs by hiring a junior-level attorney. This person’s primary responsibility would be managing relationships with outside law firms. You’d get the insider’s perspective and commitment, with outside counsel providing the expertise. But you wouldn’t benefit from the judgment of a senior person on strategic business decisions.
     

    The third option, known as “outsourced general counsel,” provides a middle path. Basically, you contract with a law firm that offers flexible arrangements depending on your needs. For example, they might provide access to a lawyer any time you need one, by the day, by the week, or at specific times that you designate in advance—such as for quarterly board meetings or other scheduled events.

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    • What is the actual cost of hiring an in-house attorney? Specific salary information is hard to find. The American Bar Association provides data on legal salaries. The ABA Journal published an overview based on data from the Bureau of Labor Statistics. While these data include salaries for lawyers at all experience levels, there is no break-out for corporate attorneys as opposed to those working at law firms. However, you can see average salary differences geographically.
    • It’s interesting to look at the specific services offered by firms that are innovating the “outsourced General Counsel” model. Here’s a link to one such site, chosen at random.