OPINION | The battle of the in-house legal team: private Chinese companies v MNCs
2018/6/06
Author: Shawn Chen
The gap between private Chinese companies and multinational corporations (MNCs) in regards to their attractiveness as an employer is narrowing. In this article our consultant highlights the pros and cons for lawyers working at each. Private companies in China are thriving and have successfully expanded their businesses into the global marketplace. They are performing well in global capital markets and are very active in cross-border merger and acquisitions. There is no doubt that such Chinese private companies are in serious need of legal talent, especially professional lawyers who can provide solid support not only with their daily operations but also on major business projects across the world.
According to our research in 2017 and 2016, although multinational companies remained dominant in hiring experienced lawyers, now we see these Chinese companies quickly catching up in their need to hire lawyers. Many lawyers in China are facing the need to choose between private Chinese enterprises and renowned global Fortune 500 companies when considering their next in-house career move.
What are the points to consider?
1. Compensation
It is hard to decide which side of the in-house market offers higher compensation due to the variety of pay structures we see. Generally speaking, international companies offer a higher base salary, normally with a bonus of around 20%. In contrast, private Chinese companies usually pay lower fixed compensation, but their bonuses are more attractive, often up to 8-9 months of base salary. In addition some Chinese companies offer stocks as supplementary benefits. If a business is profitable throughout the year there is a greater possibility to earn a big bonus. For most private Chinese companies, their business goal is ambitious and aggressive which means they always need capital for investment, which can negatively affect the amount of bonus paid employees. As an alternative, the senior management may be offered stocks as a kind of bonus as a way of creating a strong financial and emotional attachment to the company.
The annual salary increment rates differ widely between these two groups of companies. At MNCs the annual increase rate is usually 5%-10%, unless there is a promotion which may lead to a larger base salary rise. In private Chinese companies, the increase will fully depend on how much profit the business earns as a whole and how the individual’s performance is perceived. There is no bottom or ceiling limit on the increase amount. This can also go the other way and a reduction in salary is also possible.
2. Culture
It is known to all that the culture within private Chinese companies is tough and high-pressured. They are more profit and results driven. The business requires lawyers to play a large role in the company rather than just as a simple supportive function. The working environment is sometimes even harder than in a law firm. Arguably lawyers do not find the work/life balance which private practice lawyers are usually looking for when making a move in-house. In comparison, multinational enterprises normally have a well-established company culture and systems where their legal counsels enjoy high respect and smooth internal communications. A balanced life style is more achievable within an international and mature environment.
3. Development
A harsh and driven environment can be a double edged sword. It can do harm to an individual but it can also bring valuable hands-on experience. We often find young and dynamic general counsels in private companies but this is rare at global MNCs. It is hard to imagine what these young lawyers have gone through in a private company to achieve such a strong position, but for those who make it, their opportunity for development is much broader. However, it is a different case in Global Fortune 500 businesses. Multinational companies have complicated criteria and processes for promotion; age, previous education background, working experience, leadership skills are all weighed up. A senior lawyer may have shown outstanding performance, but to make it to General Counsel there is always more to be considered.
4. Exposure & training
Fortune 500 companies in China have a good history of developing and nurturing their own internal functions, especially in legal. Most of the routine legal work doesn’t need to be done from scratch and they have good precedents to follow which save an in-house counsel’s time and energy. Good internal programs like rotations between offices and business units and various on-job-training are always available at MNC, while this rarely exists at private Chinese companies.
Lawyers within private Chinese companies generally learn on the job. Very often, there are no pervious examples to study from, so making decisions and trying different things is crucial. Arguably these scenarios make for better lawyers.
It is hard to say which route is more beneficial financially and professionally. We always advise lawyers that they should assess the opportunities available across the spectrum and see which is more suited to their long term career plan.
For more information on the current market or to discuss your future career in more detail please contact shawn.chen@ssq.com.
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