Executive Compensation: Insights from the 2012 CompStudy Survey of Venture-Backed Companies
October 11, 2012
Life Sciences Edition
Today’s moderator
Bryan Pearce Partner, Americas Director, Ernst & Young Entrepreneur of the Year Ernst & Young
Today’s agenda
► CompStudy overview ► Current Founder’s Dilemmas research ► 2012 survey – company profiles ► Summary compensation data ► CEO compensation review ► Hot topics and current trends
Today’s presenters
Noam Wasserman Harvard Business School Associate Professor, Tukman Faculty Fellow
Lia Der Marderosian WilmerHale Partner
Erik Lundh Park Square Executive Search Managing Partner
Kim Wethly WilmerHale Partner
Pam Kelleher Ernst & Young Partner
Today’s agenda
► CompStudy overview ► Current Founder’s Dilemmas research ► 2012 survey – company profiles ► Summary compensation data ► CEO compensation review ► Hot topics and current trends
CompStudy Overview
CompStudy.com
All reporting now done on our online, fully interactive platform, located at CompStudy.com.
Participants in the annual survey receive free, year-long access to the reports.
New features for 2012:
• Board data
• Print-to-PDF for all reports
• VC Scorecards
CompStudy Overview
The CompStudy.com Survey
Data collected in every survey includes:
• Cash compensation and equity
• Founding team
• Financing history
• Company size
• Products/revenue
• Equity programs
• Executive backgrounds
• Board of directors
Technology survey
Life Sciences survey
2000
2002
2012
2012
211 cos. 578 cos.
168 cos. 202 cos.
Today’s agenda
► CompStudy overview ► Current Founder’s Dilemmas research ► 2012 survey – company profiles ► Summary compensation data ► CEO compensation review ► Hot topics and current trends
CAUSES OF FAILURE IN VC-BACKED VENTURES
Product devt. Functional mgmt.
Market probs.
35% 65%
PROBLEMS
THE RESEARCH
36
10,000 founders
THE RESEARCH
4,000 startups
20,000 executives
Founding
When to Found
Building the Team
Beyond the Team
Exit Dilemmas
New-Venture Hiring
CORE DILEMMAS
Y
Y
Y
Y
Y
CORE FOUNDER
CO-FOUNDERS
INVESTORS, PARTNERS
ALL OF THE ABOVE
HIRES
“RICH VS. KING”
RICH
KING
Flop
Rich & King
Small Player
Big Player
Low High FINANCIAL GAINS
CON
TRO
L
FINANCIAL TRADEOFF
The Founder’s Dilemmas, Figure 11.3.
Shar
e of
Com
pany
Val
uatio
n ($
M)
Gave up CEO and Board
control
Kept CEO and Board
control
• Detailed table of contents • Chapter 1 • Self-assessment survey • “When to Leap” video • Other awesome stuff
NoamWasserman.com
Audience Poll
What is your company’s outlook on the economy over the next 12-18 months:
A. The economy has turned a corner and we are beginning to see expansion opportunities
B. Still a difficult business environment
C. Receiving mixed signals from the market
Today’s agenda
► CompStudy overview ► Current Founder’s Dilemmas research ► 2012 survey – company profiles ► Summary compensation data ► CEO compensation review ► Hot topics and current trends
2012 survey – company profiles
Number of full time employees
Headcount
Institutional rounds raised
Number of rounds
Later stage companies are better-represented in this year’s survey; 78% of the companies surveyed have raised 2+ rounds of financing, compared to 64% in 2011 Respondent company headcounts closely matched the profile of 2011 respondents
% respondents in this range
% respondents in this range
2012 survey – company profiles
Business Segments
Geography
% respondents in this range
% respondents in this range
Revenue
2012 survey – company profiles
Founder status - % of role held by founders vs. non-founders
Participants had essentially the same founder/non-founder split by position profile as in 2011
Audience Poll
What change do you anticipate for base salaries next year?
A. Decrease greater than 5%
B. Decrease up to 5%
C. No change
D. Increase up to 5%
E. Increase over 5%
Today’s agenda
► CompStudy overview ► Current Founder’s Dilemmas research ► 2012 survey – company profiles ► Summary compensation data ► CEO compensation review ► Hot topics and current trends
Compensation data
Founder cash compensation *Fewer positions shown due to lack of founders in certain roles*
Founder cash targets were up by 1.1% on average, a slower rate of growth than their non-founder peers.
Compensation data
Founder current equity holdings, as % of fully diluted shares *Fewer positions shown due to lack of founders in certain roles*
On the average, founders of life sciences companies hold significantly less equity than their technology peers – largely due to the more capital-intensive nature of most life sciences start-ups.
CompStudy Overview
Percentage growth in year-over-year non-founder total target cash compensation
Compensation data
Cash compensation – non-founders, 2011 and 2012
Non-founder total target cash compensation was up 3.7% in 2012, a marked increase over the 1.6% rate of increase between 2010 and 2011
Compensation data
Bonus as a percentage of base salaries – non-founders
% of base salary
On average in 2011, non-founder executives received 60.3% of their target bonuses Target bonuses were up 6.1% on average, but due to increases in base salaries, actually made up a smaller percentage of total cash compensation for a few positions.
Compensation data
Equity holdings – non-founder executives
Current equity - % of fully diluted shares
Equity at hire - % of fully diluted shares
Audience Poll
What percentage of the equity in your company is reserved for management, directors and employees?
A. Less than 10%
B. 11 – 15%
C. 16 – 20%
D. 21 – 25%
E. More than 25%
Compensation data
Equity holdings – type of equity vehicles used
% of equity grants given by vehicle type
Compensation data
Percentage of non-founder executives eligible for severance
80% of non-founder CEOs surveyed had some sort of severance package, up from the survey’s historical average of 73%. COO was the only other position to exceed 50% participation.
Compensation data
Length of severance packages granted (months)
As the median numbers suggest, the length of nearly every severance package granted is a multiple of three months
Today’s agenda
► CompStudy overview ► Current Founder’s Dilemmas research ► 2012 survey – company profiles ► Summary compensation data ► CEO compensation review ► Hot topics and current trends
CEO compensation review
Non-founder CEO base (1,000s USD)
By number of financing rounds raised By number of full time employees
CEO salaries are more highly correlated with company headcount, as evidenced in the chart above by the large gap in pay between CEOs at 1-20 FTE companies and CEOs at 21-40 FTE companies
CEO compensation review
By number of full time employees By number of financing rounds raised
Non-founder CEO current equity (% of fully diluted shares)
Headcount is a slightly better predictor of non-founder CEO equity; there is a lot of variability in the data when sliced by financing status. This is partly attributable to difference between therapeutics companies and all others in the survey; more filters can be applied at CompStudy.com
Today’s agenda
► CompStudy overview ► Current Founder’s Dilemmas research ► 2012 survey – company profiles ► Summary compensation data ► CEO compensation review ► Hot topics and current trends
Hot topics and current trends
Recruiting and retaining top talent in an increasingly competitive market - Founder transitions - Recruiting dynamics - Retention issues
The effect of tax law changes on executive compensation
Revisiting the effect of secondary markets for common on compensation planning
Performance based vesting
Recap
Thank you for joining us for today’s webinar. For more information, please visit www.compstudy.com.
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