Press Release - August 30, 2004
Lafayette, CA — August 30, 2004 — Syzygy Consulting Group’s 2004 Pre-IPO and Private Company Total Compensation Survey reported a dramatic 29 percent increase in aggregate employee ownership in private companies during the last year. “The data show that stock options are key to making a private company thrive and create jobs,” said David Broman, Syzygy’s CEO.
Syzygy’s annual private company compensation survey is the only executive and employee compensation survey conducted in association with Silicon Valley’s leading law firms including Cooley Godward, Fenwick & West, Gray Cary, Greenberg Traurig, Gunderson Dettmer, Heller Ehrman, Latham & Watkins, Pillsbury Winthrop and Simpson Thatcher & Bartlett.
“For over five years Syzygy has been pleased to be associated with a national compensation survey of this scope, depth and quality,” said Broman. “This survey is an excellent source to help private technology companies set a standard for establishing thoughtful and fair executive compensation and better link employee compensation and benefits to their overall business strategy,” said Broman. The survey reports upon stock/stock option grants, stock plan design, benefit programs, 401(k) plans, severance agreements and change-in-control provisions, with specific total compensation data on Boards of Directors, the Chairman position, CEOs and other executives, and over 5,000 employees in 33 benchmark jobs throughout five technology industries.
What’s Changing?
The 2004 survey results showed:
- Aggregate employee ownership percentages increased from 14 to 18 percent of the company; including company founders, ownership jumped to 27 percent.
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Stock options remain the key form of stock compensation, with plans being used at 99 percent of companies:
- 32 percent of the companies provide performance-based stock option grants
- 15 percent of companies also provide restricted stock grants
- 32 percent of the companies provide performance-based stock option grants
- Stock compensation continues to be broad based, with 96 percent of employees receiving new-hire stock option grants and 85 percent receiving follow-on grants.
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New corporate governance rules have also spurred the growth in stock compensation:
- More companies have separated the Chairman role from the CEO job
- Board members, especially Chairpersons, are grabbing a bigger share of the company through stock compensation — An independent Chairman of the Board can now command 2.5 percent of the company
- The aggregate stock compensation provided to Boards of Directors jumped to 4.6 percent in 2004
- More companies have separated the Chairman role from the CEO job
- CEO ownership nearly doubled from five to nine percent of the company in 2004.
- CEO cash compensation also increased from a median of $238,600 to $301,700, a 26 percent jump.
- The Medical/Biotech industry showed the most dramatic jump in executive cash compensation and stock ownership.
- The Software industry has the highest executive ownership percentage and the lowest executive total cash compensation when compared to the other industries.
- A lead engineer’s median ownership percentage is now 0.128 percent of the company with a median total cash compensation of $114,059.
- Non-executive base pay increased by 3.7 percent in 2004 compared to 3.0 percent in 2003.
In addition to the stock and cash compensation findings, Syzygy’s survey reports on other human resources practices. For example,
- Foreshadowing a tightening labor market, sign-on bonuses are making a slow comeback with 15 percent of the companies providing them in 2004 compared to less than one percent in 2003.
- While 401(k) plan prevalence was unchanged, the number of companies offering matching contributions increased from six to 46 percent, illustrating a heightened concern about retaining key employees.
- Employee health care contributions for combined employee/family coverage increased from 6.3 to 15.8 percent of the employer’s premium, reflecting the soaring cost of health care in 2004.
About the Survey
Syzygy’s 2004 Pre-IPO and Private Company Total Compensation Survey was completed in August 2004 and reflects pay practices of 122 companies with a median population of 72 employees. All participating companies were in the technology sector, nearly equally split between the Software, Medical/Biotech, E-Commerce/Internet, Communications/Networking and Technology Manufacturing industries.
Forty-one percent of the companies were located in the Silicon Valley/San Francisco Bay Area, 16 percent on the East Coast, 17 percent in the Central and Southern States, 13 percent in the Northwest and 12 percent in Southern California. The median rounds of financing completed for the participating companies were five, with a median cumulative capital raised of $60 million. Median reported revenues were $24.9 million.
Participating companies use the comprehensive results from Syzygy’s survey to:
- Develop company capitalization models/forecasts from initial investment through liquidity (sale or IPO) including the dilutive impact of employee ownership.
- Provide objective and independent documentation for compensation recommendations to the Board of Directors.
- Validate Board of Directors and CEO compensation packages.
- Define the appropriate pay mix (cash vs. stock) for executives and employees.
- Design stock plans (restricted stock, stock options and performance-based grants) based on competitive data including grant guidelines and participation rates.
- Establish a cash compensation structure by job category.
- Determine competitive benefit programs.
For more details about the 2004 survey visit www.syzygyconsulting.com or contact a Syzygy compensation consultant at 925-284-3669.
About Syzygy Consulting Group
Syzygy Consulting Group, established experts in high technology compensation practices, serves clients ranging from small private companies to the largest multinational corporations. Syzygy’s customized human resources consulting and compensation design services help clients define and implement Board of Director compensation, establish fair compensation for the Chairman of the Board and CEO, link executive compensation to performance and develop other employee compensation and benefits 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
