The State of High-Tech and Life Sciences Executive Compensation Quiz: Answers and A Bit of Perspective on What You Can Expect in 2010
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isn’t surprising that the top sales executive would do even better, because sales is all about driving revenue growth, with bonuses pegged to hitting revenue goals. What struck Lapat as surprising was that when it came to equity for non-founders (a subject I didn’t cover in the quiz), CTOs and sales execs were in a virtual dead heat. “The sales exec has always had more cash,” says Lapat. “But in previous years we’ve seen CTOs with more equity—not twice as much, but a modest step up. So maybe there’s a higher value being placed on revenue generation.” In any case, he says, “It used to be the CTO was the crown jewel. But now it seems there are two crown jewels. The generator of the technology as well as the generator of the revenue.”
Greeley adds that companies this year were focused even more than usual on rewarding top-line revenue growth. “What I observe on my boards is sales guys got these super commissions structures this year as a way to really drive revenue generation. CEOs and boards probably paid a higher premium for revenue in this environment”
2a) Which life sciences management position [other than CEO] has the highest compensation package (bonus and salary)?
Correct Answer: COO
Commentary: Lapat is sticking to his view that the COO just is not needed by most small companies, and says he can’t fully explain the result. “It’s just weird,” he says. Greeley is also surprised. “None of my companies have COOs, so I would have thought it was the CTO.” He guesses that the answer either means that founders were moved to the COO role, or that somehow a premium was paid for people who could make the trains run on time and bring products out.
3) What percentage of technology CEOs have severance packages?
Correct Answer: 58 percent.
Commentary: See question 3a below.
3a) What percentage of life sciences CEOs have severance packages?
Correct Answer: 71 percent
Commentary: “I’m surprised they were as low as they were,” says Greeley. “I don’t think I have any companies where there is not some severance provisions for CEOs.” Founder CEOs are less likely to have severance because they have so much equity, he says. “But for any hired gun CEO, that’s just part of the discussion now.”
“This is always interesting when I show the data to the VCs, because they seem to think all their CEOs have severance packages,” says Lapat. “For the VCs, they don’t like to negotiate severance packages, and all it takes is one or two and it feels like they’ve negotiated with everybody.” He adds, though, that in tech companies the percentage of CEOs with severance packages has historically been around 60 percent. “It’s not like this year is an anomaly.”
But let’s look at life sciences. Not only are life sciences CEOs more likely to have severance packages, they get better packages—an average of 9.2 months’ salary versus 6.8 months’ for tech CEOs, says Lapat. “It says to me that there’s a lot more uncertainly in life sciences,” he says. “In large measure, biotech is hit it big or bust. There is less opportunity for doubles and triples than in tech. In tech, there are plenty of doubles.”
Greeley adds that CEO skills in tech are highly transferrable between fields like software and financial services. Life sciences CEOs are more specialized, and there are fewer jobs—so they need a more generous severance package.
4) What technology management position is least likely to have a severance package?
Correct Answer: CTO
Commentary: Lapat theorizes that CTOs at tech companies might be focusing on getting better equity packages, rather than severance. It could also be that they are less likely to focus on negotiating a severance package because there is a perception of more stability in that position, he says. Similarly, there could be a relative over-supply of technical talent on the market that curtailed their negotiating leverage. Then again, he says, it could be that “they’re the poorest at negotiating for themselves.” (Founders, who are much less likely to have severance packages than non-founders, are excluded from the severance data, so the fact that many CTOs might be founders of tech companies would not have affected these results.)
4a) What life sciences management position is least likely to have a severance package?
Correct Answer: Head of Sales
Commentary: This is the only question our audience got right. Greeley, who expected the same answer in for tech companies, says that sales skills are highly transferrable, so the need for a severance package is lower.