Private Companies to Pay Higher Bonuses and Create More Jobs in 2010 Following a Dismal 2009

Press Release - September 10, 2009

Private Companies to Pay Higher Bonuses and Create More Jobs in 2010 Following a Dismal 2009

LAFAYETTE, Calif.--(BUSINESS WIRE)--Syzygy Consulting Group’s 2009 Pre-IPO and Private Company Total Compensation Survey reports that private companies will increase bonuses in 2010 and have also budgeted for more new hires. “In my discussions with CEO participants there is much optimism for growth in jobs and pay in 2010,” says David Broman, Syzygy’s CEO. “This follows a year when almost everyone – including CEOs – went without pay increases and had bonus pay cancelled altogether. But in 2010 the mantra is grow,” Broman reports. “Private companies are budgeting for higher bonuses in 2010, some returning to highs last seen in 2007.”

2009 has been a dismal year for employee compensation at private companies, showing the worst year-over-year decrease in total pay since 2001. Brian Andriuzzo, Syzygy’s CFO reported that “base pay fell on average 6.2 percent in 2009 and bonus pay dropped more than 60 percent for rank and file, primarily due to the number of companies that froze salaries and/or eliminated incentive pay.” Andriuzzo added that “even stock options grants fell to their lowest level in years, with overall ownership now standing at 15 percent, a one percent reduction.” However, not everyone went without. “While it is true that the financial backers of private companies are holding the line on pay and employee stock option grants, compensation for independent Board members increased significantly, about 25 percent, telling us that private companies are still willing to pay top dollar for the Board guidance needed to succeed,” David Broman said.

Syzygy’s Pre-IPO and Private Company Total Compensation Survey, conducted annually since 1999, is recognized nationally as the premier source of private company compensation data. “Our survey team has worked diligently over the last three months compiling pay practice data on 45,700 employees at 341 private companies,” said Brian Andriuzzo. Key findings for 2009 include:

• Median CEO total cash compensation decreased 11 percent and CFO total cash compensation declined 19 percent from 2008.
   
• Average base salaries decreased by six percent year-over-year.
   
• Median bonus for a Director of Engineering fell from $12,683 to $4,311, a decrease of 66 percent, and the median bonus for a Senior Development Engineer fell from $12,020 to $4,178, a decrease of 65 percent from 2008.
   
• Aggregate employee ownership decreased one percent, falling to 15 percent of outstanding common share equivalents. The median shares available as a percent of outstanding was about seven percent.
   
• CEO stock option holding also declined by nine percent in 2009, with the median CEO-non-founder holdings at four percent of the companies they lead. Most of the decrease in executive ownership is the result of dilution from new investments and lower compensatory grants to tenured CEOs and CFOs.
   
• A CEO-founder generally receives 27 percent less cash compensation than a non-founder CEO, which is offset by compensatory stock holdings that are 2.5 times greater than their non-founder counterpart.
   

Andriuzzo commented on other aspects of this year’s survey results. “401(k) matches, employee paid time off, severance benefits and paid holidays went unscathed despite the tighter purse strings in 2009, with some companies actually increasing the amount they contribute to 401(k) plans. Private companies also remain more generous when addressing the health care needs of their employees. In 2009, private companies absorbed more of the increase in employer sponsored health care costs,” observed Andriuzzo. Nonetheless there was a median increase of eight percent in the amount employees contribute to cover premiums. “This demonstrates that the lack of restraint in health care costs continue to strain private companies,” Andriuzzo added.

For more details about the 2009 survey results, contact a Syzygy compensation consultant at 925-284-3669 or visit www.syzygyconsulting.com

About Syzygy Consulting Group LLC

Syzygy Consulting Group LLC, established experts in corporate compensation practices, serves clients ranging from large public 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 overall compensation effectiveness. Syzygy’s Pre-IPO and Private Company Total Compensation Survey began in 1999, and now reflects 10 years of data on private company pay practices. Only participating companies receive the confidential results, and participants are usually clients of Syzygy or preferred private company clients of Silicon Valley’s leading law firms including Cooley Godward, DLA Piper, Fenwick & West, Gibson Dunn, Greenberg Traurig, Manatt Phelps, Morgan Lewis, Morrison & Foerster, Orrick, Pillsbury Winthrop Shaw Pittman and Simpson Thacher. Syzygy is a registered trademark of Syzygy Consulting Group LLC.