Chief Legal Officers (CLOs) expect budgets to remain flat even as they wrestle with a range of issues from security and compliance to diversity, according to the 2015 CLO Survey, recently released by the Association of Corporate Counsel (ACC).
The annual survey, which this year counted 1,289 respondents, found “almost two-thirds of chief legal officers said they plan no change in either staffing or budget,” according to Bloomberg reporter Ellen Rosen.
ACC President and CEO Veta Richardson told Ms. Rosen that law departments “have no room to absorb an increased hourly rate.”
About three-quarters of the respondents are based the US.
CLO Strategies for Managing Costs
Most CLOs – some 65% – expect budgets to remain more or less flat and are focused on three cost management trends which are consistent throughout this ACC survey and other studies.
Alternative fee arrangements, or AFAs, are the top technique being deployed (72%) according to a summary of the findings. It also appears the larger the company, the more likely it is to move toward and AFA model. The ACC reported flat fees, one category of AFAs, nearly doubled from 12% last year to 20% this year and that “companies with revenues of $4 billion or more were twice as likely as companies with revenues under $100 million to use AFAs.”
“There’s a greater comfort level with managing budgets, using project management tools to track outside counsel spending and doing a cost-benefit analysis to structure [fee arrangements] for particular types of matters. There’s just a greater sophistication than there was five to 10 years ago,” according to Ms. Richardson in an interview reported by Law360.
The same Law360 report indicated that corporate legal departments continue to consolidate outside law firms and that 30% of corporate legal plans to bring more work in-house. Law360 also cited verbatim comments from respondents including one that underscores the business case from a CLO perspective:
The fully loaded costs of doing work in-house average about 50 percent less than many of the company’s outside counsel.
“There is both a legal and business dimension to the equation,” according to Ms. Richardson, in comments to Erin Harrison for an article in InsideCounsel, “In order to remain effective, general counsel are triaging legal expenditures and applying more strategic approaches, leading to better overall law department management.”
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Compliance Emerging as a Key Trend
An overwhelming majority, “96 percent are prioritizing compliance and ethics issues,” according to the ACC. In addition, compliance topped the charts as the “top practice area for hiring over the past year.”
Compliance has been a common theme at conferences, such as the ACC’s 2014 Annual Meeting in New Orleans and a regular point of interest on the corporate counsel agenda in multiple studies conducted over 2014. One study which focused on job prospects for legal professionals explicitly cited litigation as an area of opportunity, however compliance was clearly an undertone, which may have provided early signs of the emerging trend.
“One of the trends we’re seeing is a demand for hybrid legal and legal support roles,” according to Charles Volkert, executive director at Robert Half Legal in article written by Rebekah Mintzer for Corporate Counsel titled Things Are Looking Up for In-house Counsel Hiring
The report reviewed a Robert Half Legal survey and Mr Volkert indicated, “a job candidate could have in-depth background and experience in both compliance and litigation, or intellectual property and data privacy.”
In her more recent report for InsideCounsel, Ms. Harrison noted “more than 30 percent of CLOs are creating new positions within their law departments to focus on compliance-related work.” In fact, ethics, regulatory issues, information privates were all “top of mind issues for CLOs around the world.”
Concern for Cyber Threats and Security
Security was also a notable theme in the ACC’s study. “Around 25 percent of all CLOs and approximately 33 percent of large law CLOs stated the topic would be ‘extremely important’ in the year ahead,” according the ACC. “The likelihood that a company experienced a data breach increased to over 50 percent among companies with more than $4 billion in revenue.”
Cybersecurity and data security were a persistent points of discussion at the 2015 LegalTech New York tradeshow held earlier this month. Sessions honed in on these topics where panelists identified the top four cyber threats (rouge employees, targeted cybercrime, nation-state espionage and hacktivist) and later called for “more case studies and specific best practices.”
“Thwarting and responding to breaches of corporate data is increasingly a reality for today’s GCs and CLOs,” said Ms. Richardson, in a press release announcing the study. “As attempted data breaches become more sophisticated, the CLO will play a growing role in cybersecurity strategy, risk assessment and prevention.”
Diversity Comes Into Focus
The 2015 survey marked the first year in which the ACC examined “diversity among the ranks of CLOs.” The survey found a divide in compensation between genders:
While 38 percent of male CLOs reported total compensation packages of more than $400,000, only 26 percent of female CLOs crossed this total compensation threshold. Similarly, nearly three in 10 men reported base salaries of $300,000 or more, compared to 22 percent of women.
ALM reporter Sue Reisinger examined the pay disparity in her piece for Corporate Counsel reporting “those who identified as a member of a minority or underrepresented group were six percentage points more likely than others to earn under $200,000.”
“Examining the overall representation of women, minorities and LGBT in-house lawyers raised questions about continuing compensation gaps,” according to the ACC.
In an accompanying interview in that Corporate Counsel article, Ms. Richardson points toward “investing in professional development” as one strategy for making up the pay gap.
“I believe by raising the awareness of pay disparities and letting members know what is going on in the marketplace, they are better able to negotiate compensation and understand their worth,” she added in Ms. Reisinger’s report.
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