Executive Compensation: Insights from the 2012 CompStudy ... · from the 2012 CompStudy Survey of...

Executive Compensation: Insights from the 2012 CompStudy Survey of Venture-Backed Companies

October 11, 2012

Life Sciences Edition

Today’s moderator

Bryan Pearce Partner, Americas Director, Ernst & Young Entrepreneur of the Year Ernst & Young

Today’s agenda

► CompStudy overview ► Current Founder’s Dilemmas research ► 2012 survey – company profiles ► Summary compensation data ► CEO compensation review ► Hot topics and current trends

Today’s presenters

Noam Wasserman Harvard Business School Associate Professor, Tukman Faculty Fellow

Lia Der Marderosian WilmerHale Partner

Erik Lundh Park Square Executive Search Managing Partner

Kim Wethly WilmerHale Partner

Pam Kelleher Ernst & Young Partner

Today’s agenda


CompStudy Overview

CompStudy.com

All reporting now done on our online, fully interactive platform, located at CompStudy.com.

Participants in the annual survey receive free, year-long access to the reports.

New features for 2012:

• Board data

• Print-to-PDF for all reports

• VC Scorecards

CompStudy Overview

The CompStudy.com Survey

Data collected in every survey includes:

• Cash compensation and equity

• Founding team

• Financing history

• Company size

• Products/revenue

• Equity programs

• Executive backgrounds

• Board of directors

Technology survey

Life Sciences survey

2000

2002

2012

2012

211 cos. 578 cos.

168 cos. 202 cos.

Today’s agenda


CAUSES OF FAILURE IN VC-BACKED VENTURES

Product devt. Functional mgmt.

Market probs.

35% 65%

PROBLEMS

THE RESEARCH

36

10,000 founders

THE RESEARCH

4,000 startups

20,000 executives

Founding

When to Found

Building the Team

Beyond the Team

Exit Dilemmas

New-Venture Hiring

CORE DILEMMAS

Y

Y

Y

Y

Y

CORE FOUNDER

CO-FOUNDERS

INVESTORS, PARTNERS

ALL OF THE ABOVE

HIRES

“RICH VS. KING”

RICH

KING

Flop

Rich & King

Small Player

Big Player

Low High FINANCIAL GAINS

CON

TRO

L

FINANCIAL TRADEOFF

The Founder’s Dilemmas, Figure 11.3.

Shar

e of

Com

pany

Val

uatio

n ($

M)

Gave up CEO and Board

control

Kept CEO and Board

control

• Detailed table of contents • Chapter 1 • Self-assessment survey • “When to Leap” video • Other awesome stuff

NoamWasserman.com

Audience Poll

What is your company’s outlook on the economy over the next 12-18 months:

A. The economy has turned a corner and we are beginning to see expansion opportunities

B. Still a difficult business environment

C. Receiving mixed signals from the market

Today’s agenda


2012 survey – company profiles

Number of full time employees

Headcount

Institutional rounds raised

Number of rounds

Later stage companies are better-represented in this year’s survey; 78% of the companies surveyed have raised 2+ rounds of financing, compared to 64% in 2011 Respondent company headcounts closely matched the profile of 2011 respondents

% respondents in this range



Business Segments

Geography



Revenue


Founder status - % of role held by founders vs. non-founders

Participants had essentially the same founder/non-founder split by position profile as in 2011

Audience Poll

What change do you anticipate for base salaries next year?

A. Decrease greater than 5%

B. Decrease up to 5%

C. No change

D. Increase up to 5%

E. Increase over 5%

Today’s agenda


Compensation data

Founder cash compensation *Fewer positions shown due to lack of founders in certain roles*

Founder cash targets were up by 1.1% on average, a slower rate of growth than their non-founder peers.

Compensation data

Founder current equity holdings, as % of fully diluted shares *Fewer positions shown due to lack of founders in certain roles*

On the average, founders of life sciences companies hold significantly less equity than their technology peers – largely due to the more capital-intensive nature of most life sciences start-ups.

CompStudy Overview

Percentage growth in year-over-year non-founder total target cash compensation

Compensation data

Cash compensation – non-founders, 2011 and 2012

Non-founder total target cash compensation was up 3.7% in 2012, a marked increase over the 1.6% rate of increase between 2010 and 2011

Compensation data

Bonus as a percentage of base salaries – non-founders

% of base salary

On average in 2011, non-founder executives received 60.3% of their target bonuses Target bonuses were up 6.1% on average, but due to increases in base salaries, actually made up a smaller percentage of total cash compensation for a few positions.

Compensation data

Equity holdings – non-founder executives

Current equity - % of fully diluted shares

Equity at hire - % of fully diluted shares

Audience Poll

What percentage of the equity in your company is reserved for management, directors and employees?

A. Less than 10%

B. 11 – 15%

C. 16 – 20%

D. 21 – 25%

E. More than 25%

Compensation data

Equity holdings – type of equity vehicles used

% of equity grants given by vehicle type

Compensation data

Percentage of non-founder executives eligible for severance

80% of non-founder CEOs surveyed had some sort of severance package, up from the survey’s historical average of 73%. COO was the only other position to exceed 50% participation.

Compensation data

Length of severance packages granted (months)

As the median numbers suggest, the length of nearly every severance package granted is a multiple of three months

Today’s agenda


CEO compensation review

Non-founder CEO base (1,000s USD)

By number of financing rounds raised By number of full time employees

CEO salaries are more highly correlated with company headcount, as evidenced in the chart above by the large gap in pay between CEOs at 1-20 FTE companies and CEOs at 21-40 FTE companies

CEO compensation review

By number of full time employees By number of financing rounds raised

Non-founder CEO current equity (% of fully diluted shares)

Headcount is a slightly better predictor of non-founder CEO equity; there is a lot of variability in the data when sliced by financing status. This is partly attributable to difference between therapeutics companies and all others in the survey; more filters can be applied at CompStudy.com

Today’s agenda


Hot topics and current trends

Recruiting and retaining top talent in an increasingly competitive market - Founder transitions - Recruiting dynamics - Retention issues

The effect of tax law changes on executive compensation

Revisiting the effect of secondary markets for common on compensation planning

Performance based vesting

Recap

Thank you for joining us for today’s webinar. For more information, please visit www.compstudy.com.

http://www.compstudy.com/

Executive Compensation: Insights from the 2012 CompStudy ... · from the 2012 CompStudy Survey of...

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