How Private Companies Compensate Employees

Press Release - June 10, 2010

How Private Companies Compensate Employees

LAFAYETTE, Calif.--(BUSINESS WIRE)--Many private companies are changing the way they pay employees. Some are relying on high base salaries and large bonuses, whereas others have tightened pay levels in response to labor market conditions. However, “many companies, especially start-ups, still follow the ‘Silicon Valley’ compensation model. They provide lower cash but significant grants of stock options,” observed David Broman, CEO of Syzygy Consulting Group LLC, a San Francisco Bay Area executive compensation consulting firm. The reason for the recent changes in pay strategy is oddly due to an increase in hiring.

“We see our private clients being more measured in their pay decisions, while our public clients are quick to offer higher pay”

Private companies are creating more jobs at a time when job seekers continue to outnumber open positions. “In fact, there are more applicants for every job than we’ve seen in several years,” said Broman. “This sporadic market is forcing private companies to rethink their approach to compensation,” he noted. The greater number of applicants is slowing the hiring process. This also surfaces more candidates with varied compensation expectations. These varying expectations enable companies to review and modify their pay practices. “In fact, our private clients find that most job applicants now focus on cash, and trying to offer competitive pay with an emphasis on equity is a tough sell,” observed Brian Andriuzzo, Syzygy’s CFO.

To add to the woes of private company compensation practices, recent trends indicate that public companies are offering pay levels that significantly outpace the private sector, creating a pay gap in the labor market. “We see our private clients being more measured in their pay decisions, while our public clients are quick to offer higher pay,” said Andriuzzo.

While private companies consider different ways to pay their workforce, the results do not apply equally to all employees. “Experienced senior executives still demand both competitive cash compensation and generous stock options,” said Broman. “There is less inhibition in private companies than public companies when it comes to executive compensation,” he added.

Private companies represent a significant portion of the labor market. To further understand how these companies attract and retain talent, Syzygy is seeking private companies to participate in its annual compensation survey.

Administered since 1999, Syzygy’s nationwide Pre-IPO and Private Company Total Compensation Survey is the only one of its kind conducted in association with leading law firms including Cooley, DLA Piper, Fenwick & West, Gibson Dunn, Morgan Lewis, Morrison & Foerster and Pillsbury Winthrop.

The survey reports upon total cash and stock compensation data for Board members, CEOs and other executives. It also reports on the total compensation provided to management and other employees in over 40 benchmark jobs.

Private companies can visit www.syzygyconsulting.com/ipo.html or contact a Syzygy compensation consultant at 925-284-3669 to participate and request updated survey results.

About Syzygy Consulting Group LLC

Syzygy Consulting Group serves clients ranging from large multinational corporations to small private companies. Founded in 1995, Syzygy’s customized consulting services help clients define and implement compensation programs to retain key talent, link compensation to performance and improve the effectiveness of overall compensation programs. Capabilities include designing Board/executive compensation, sales incentive and base pay delivery programs. Syzygy is a registered trademark of Syzygy Consulting Group LLC.