HR Magazine - May 10, 2005
‘Stealing’ CEOs From The Public Sector
Here’s more Sarbanes-Oxley fallout: Some private companies are enticing executive talent away from public companies with the lure of stock compensation.
With the June deadline for expensing stock options nearly upon us, public companies are scaling back on stock compensation, says David Broman, CEO of Lafayette, Calif.-based Syzygy Consulting Group, which specializes in compensation practices for high-technology companies. “Several of our public clients are decreasing future grants and even accelerating the vesting of existing grants just to avoid expensing their legacy stock compensation,” he says.
As a result, “we’re seeing an interesting backlash to what some of the public companies are doing,” says Broman. “A little back door is being opened now that wasn’t there as little as a year ago. Recruiters and professional headhunters [for private companies] can say, ‘See, this can tap your entrepreneurial spirit. I can get you a big piece of the pie that you’re never going to get at a public company now.’ ”
Broman notes that the executive labor market has always been aggressive for private companies, who have often had a hard time recruiting top executives. Now, he says, “private companies have a hand up over public companies in recruiting some key talent.”
And because private companies focus more on cash flow as an indicator of financial health, he says, “using stock compensation to steal talent makes good business sense.
“There’s a roar out there that expensing is going to stifle private companies, but we’re not seeing that,” says Broman. “Private companies don’t seem to be as concerned [about expensing stock options], since it’s not cash, as public companies are. “It’s an interesting trend,” Broman says, “and one we want to keep our eye on.”
