Press Release - August 8, 2006
LAFAYETTE, Calif., April 4 /PRNewswire/ -- Private companies successfully compete for highly desired executive talent by offering more stock compensation than their public company counterparts.
“The data show that stock options are key to competing in the Web 2.0 labor market,” said David Broman, Syzygy’s CEO. “Private Internet companies are offering more stock to recruit executive and entrepreneurial talent, while other industries reduce option grants, especially private software companies, where the use of stock options dropped a staggering 47 percent.”
“Public companies are also scaling back stock awards due to expensing requirements, investor dilution and the back-dating scandals,” Broman added, “allowing the new era of dot com companies to attract top talent.”
Syzygy’s annual survey is the best source for executive and employee compensation in private companies. It is conducted in association with 15 leading law firms.
“This year’s results show a general increase in cash compensation and, except for Internet companies, a significant decrease in stock compensation,” said Broman. “This is the first time we have seen the use of stock options decline so rapidly.” Syzygy has collected seven years of data on private company pay, with 2006’s results covering 12,000 employees at 207 private companies across America.
The 2006 survey results showed:
--Aggregate employee ownership decreased 15 percent, falling from 17.7 to 15.1 percent of the company. However, Internet/e-commerce companies increased employee ownership to 21 percent.
--Employee ownership in Software and Manufacturing sectors fell the greatest, decreasing 47 and 42 percent, respectively. It decreased six percent in the Life Science/Bio-Tech industry.
--Restricted stock is now used at 24 percent of the companies, representing 11 percent of employee holdings (the remaining 89 percent is held in options and SARs).
--CEO (non-founder) cash compensation jumped 16 percent but their ownership percentage decreased from 6.2 to 4.9 percent.
“I still believe that using stock options to find and keep talent makes good business sense for a private company,” observed Broman, “but expensing requirements and the need to conduct valuations because of IRC 409A are forcing investors and management to scale back use of stock options. I think this mentality is short sided. Perhaps there are valuable lessons to be learned from the Web 2.0 companies who are effectively growing the business and attracting talent by continuing to promote broad-based employee ownership.”
Visit www.syzygyconsulting.com or contact a Syzygy compensation consultant at 925-284-3669 to learn more about the private company compensation survey results.
Syzygy Consulting Group, established experts in high technology compensation practices, serves clients ranging from the largest 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. Syzygy is a registered trademark of Syzygy Consulting Group.
Contact: Brandon Butler
925-284-3669
925-284-0858 Fax
info@syzgyconsulting.com
http://www.syzygyconsulting.com
