Conscious Compensation Paying People at Social Impact...

© Copyright 2013. Compensation Venture Group, Inc. All rights reserved. © Copyright 2013. Compensation Venture Group, Inc. All rights reserved.

Conscious Compensation®: Paying People at Social Impact Startups The HUB

30-May-2013

Compensation Venture Group, Inc. www.compensationventuregroup.com [email protected]

© Copyright 2013. Compensation Venture Group, Inc. All rights reserved. © Copyright 2011. Compensation Venture Group, Inc. All rights reserved.

Compensation Venture Group

Equity Interests and Advisory Roles

Professional Roles

Online Content

Pay and Performance: The Compensation Blog

Conscious Compensation: The Impact Compensation Blog

Effective Equity: The Equity Compensation Blog

Compensation Consulting

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Expert Witness

© Copyright 2013. Compensation Venture Group, Inc. All rights reserved.

Passion and Purpose

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•  Find ways to allocate an organization’s financial capital…

•  To its human capital… •  Based on creating success for all stakeholder groups…

• Over an extended time period…

•  Increasing the economic benefits for all stakeholders…

•  To enable the organization to find and engage the right people to fulfill the mission, purpose, and business objectives


Pay in Public Companies is All Messed Up

Because of…

•  Activists

•  Consultants

•  Media

•  Wall Street

•  Government

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Pay is…

•  Short-term Focused

•  Complex

•  Homogenous

•  Compliance-focused

•  Targeted by populists

•  Increasingly regulated


The Prevailing Performance Measure: TSR

•  Stock price growth

Plus

•  Dividends (Reinvested)

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Why? Exclusive Focus on One Stakeholder Group


To Increase TSR You Can Take Money from Others

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But, You Could Optimize Value for All Stakeholders, Share

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•  This is Conscious Compensation©


Pay at Startups Used to (Still Does) Look Like This

•  Base Salary

•  Stock Options

•  Lean Benefits

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Realizing Good (or Better) Pay Required a Transaction

•  IPO

•  Acquisition

•  Restructuring

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But what if you want to build a sustainable company and not liquidate?


From Founding to Exit, Discussions Turn To…

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•  Timeline for return to (liquidity for) investors

•  Conformity with market norms = less innovation

•  Burn rate (dilution) = less sharing of ownership with employees

•  Exit strategy focus = public company norms for pay

•  Formalization of pay processes = less discretion

• Risk management = decisions driven by avoiding litigation


Finding a Balance: Capitalism and Social Impact

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Traditional Capitalist

Compensation

Conscious Compensation©

Socially/Politically Correct

Compensation


Referencing the Model of Conscious Capitalism

§  Transcend profit maximization

§  Create stakeholder engagement

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Source: Conscious Capitalism

§  Managed for simultaneous benefit of stakeholders

§  Create value for all stakeholders

§  Multiple constituencies

§  Profit important, not sole purpose

§  Trust

§  Authenticity

§  Caring

§  Transparency

§  Integrity

§  Learning

§  Empowerment


Do Companies Really Do This?

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For Start-Ups: Two Fundamental Decisions

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Form of Organization

C Corp

S Corp

LLC

Value Sharing Stay Closely Held= Compensation +

Dividends

Broad Ownership with

Interim Liquidity

Broad Ownership with Transaction-

Contingencies

Equity Compensation

Alternatives

Partner- ship

Sole Proprietor


Then the Decisions Keep Coming, and Getting Harder…

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What We Can Do Together

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• Open the dialogue about your company’s mission, purpose, strategy à people beliefs and strategy

•  Talk about founder equity splits and compensation à roots of compensation culture

•  Scrutinize early hire compensation arrangements à precedent and future constraints

•  Strategize about total compensation structures à how you want to share

•  Continually test pay decisions against purpose, mission, and strategy

Conscious Compensation Paying People at Social Impact...

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