2007 Information Technology Compensation

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<p><strong>Boston &mdash; Dec. 19</strong><br />J. Robert Scott, a retainer-based executive search firm; Ernst & Young, a global provider of professional services; and the law firm of WilmerHale, in collaboration with professors from Harvard Business School, have released data for their 2007 Compensation & Entrepreneurship Report in Information Technology. This study is a valuable tool in helping businesses and executives understand today&rsquo;s ever-changing compensation trends for senior executives within private technology companies in the software, communications, hardware/semiconductors/electronics, IT services/consulting/system integration and content/information providers market segments. <br /><br />&ldquo;The results are noteworthy because this study specifically addresses compensation trends in private, venture-backed technology companies &mdash; information not readily available elsewhere,&rdquo; explains J. Robert Scott Managing Director Aaron Lapat. &ldquo;The size and quality of the sample generates unrivalled executive level compensation data from emerging private technology companies.&rdquo;<br /><br />Five key findings were identified in this year&rsquo;s survey:<br /><br />1.    Executive Compensation: Average base salaries rose by 4.6 percent across the executive positions surveyed from 2006 to 2007, and executives earned approximately two-thirds of their target bonus in 2006. <br /><br />2.    Equity holdings: Average equity holdings for CEOs were 5.7 percent of total fully diluted equity. The combined average equity holdings for the CEO, CFO, CTO, head of engineering, head of sales and head of marketing was 11.82 percent, up from 10.86 percent in 2006.<br /><br />3.    Recruiting and Retention: As companies evolve from the early stage, with one or fewer rounds of funding, to becoming more mature companies with four or more rounds of funding, the number of founders remaining in the CEO position declines dramatically from two-thirds to one-third.<br /><br />4.    Severance Packages: Approximately two-thirds of nonfounding CEOs have some form of a severance package. Of those with severance packages, the average severance period is seven months, up from six months in last year&rsquo;s survey. Approximately 25 percent to 30 percent of the remaining team has a severance package. <br /><br />5.    Board Compensation: Very few private companies offer cash grants to board members. Typically, board members are granted between 0.25 percent to 0.5 percent of fully diluted equity to join the board. Very few outside board members of private companies receive cash compensation. <br /><br />Methodology<br /><br />The proprietary study of executive equity and cash compensation provides authoritative compensation data for 10 top management positions, examining the evolution of executive pay as companies advance from start-ups to fully developed private enterprises. The study results provide essential information for businesses and investors to stay abreast of current trends in senior executive compensation and trends in organizational structures. <br /><br />Two hundred forty privately held technology companies throughout the United States took part in the survey, which includes data on more than 1,100 executives. The concentration of respondent companies are at the early to middle stages of development based on financing status, and 64 percent of respondents are from companies with less than $5 million in revenue. Fifty-three percent of respondents represent software companies.<br /><br />The study delved into the compensation and bonus equity packages of 10 key executive positions: chief executive officer, president/chief operating officer, chief financial officer, chief technology officer, and heads of engineering, sales, marketing, business development, human resources and professional services. Data is analyzed in aggregate with detailed views by position looking at revenue, head count, geography, business segment and number of financing rounds raised. The number of financing rounds had the most profound impact on compensation trends, while geography was the least statistically relevant.<br /><br />A complete version of the study can be downloaded at www.compstudy.com. </p>

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