Five ways compensation is changing for GCs in private equity
Compensation can vary for GCs in private equity, depending on factors such as the size of the firm, the time of entry and the firm’s growth stage. However, one constant across the industry is the increasingly strategic role of the General Counsel (GC). This shift is leading to compensation packages evolving beyond base salary, to reflect a greater emphasis on long-term success.
Equity stakes and carry participation
A notable trend in GC compensation packages is the inclusion of equity stakes and carry participation. Historically, compensation was heavily weighted towards base salary and performance bonuses. However, as GCs now play a more active role in a firm’s growth and strategic direction, firms are offering greater equity-based incentives.
The concept of carried interest—a share of the profits earned by the firm on successful investments—is being extended to GCs. This aligns their financial interests with the firm’s long-term success, incentivising them to focus on sustainable growth and successful deal execution.
Performance-based bonuses
Performance-based bonuses, linked to individual achievements and firm-wide performance, are gaining prominence. Private equity firms are increasingly using bonuses to reward GCs for their contributions to both the firm’s overall success and the outcomes of individual investments.
The introduction of team-based performance bonuses reinforces the collaborative nature of private equity. These bonuses, often tied to key milestones like the successful closing of deals or achieving targets, have become a critical component of compensation, offering GCs financial incentives to drive the firm’s success.
Integration of ESG criteria
The integration of environmental, social, and governance (ESG) criteria into investment strategies is another growing focus. Private equity firms face increasing pressure to demonstrate their commitment to sustainable and responsible business practices. Consequently, GCs with expertise in ESG compliance and strategy are in high demand.
Firms value GCs who can navigate complex regulatory environments, lead sustainability initiatives and ensure that the firm’s investments align with ethical standards. Higher compensation and career advancement opportunities often reward GCs who excel in this area, a trend likely to intensify as ESG concerns continue to influence investment decisions.
Retention bonuses and flexible working arrangements
Retention bonuses and flexible working arrangements are becoming more common in compensation packages. Retention bonuses, often tied to the completion of fund cycles, ensure that key individuals remain committed through critical stages of the fund’s life, providing stability and continuity at a senior level.
Additionally, private equity firms are increasingly offering flexible working arrangements, such as remote work options and flexible hours, to attract and retain top talent. These perks, emphasising work-life balance, are highly valued in today’s competitive talent market.
Strategic negotiation for growing value
The need for GCs to negotiate compensation packages, reflecting their growing strategic value, has never been more important. Their evolving responsibilities means their contributions now extend beyond legal advice and risk management; they are critical decision-makers shaping the firm’s direction and success. This shift has prompted private equity firms to adapt their compensation structures to remain competitive in attracting and retaining top talent.
