Forget stock options - dotcom executives now want more cash and less of a gamble, according to a survey published this week.
While internet companies are still granting options to top executives, the amount of cash given as compensation has increased 13 per cent on last year, according to a US survey of the top three positions - chief executive, chief operating officer and chief financial officer - among 123 public internet companies by PricewaterhouseCoopers' human resources arm, the Unifi Network.
Base salaries of respondents increased by nine per cent, but the largest increase was in cash bonuses which went up by 28 per cent.
Edward Speidel, a director in Unifi's executive compensation practice, said: "These results evidence a continuing maturation process by internet companies that has them acting and feeling more like traditional bricks and mortar firms."
According to Carl Weinberg, a principal at Unifi, the volatility of the stock market has made executives want more guaranteed money. "Executives are perceiving that there is greater risk to taking stock options and not as much upside. They want more money up front. There's still tons of venture capitalist money in the sector, so there is an ability to pay."
Pressure from shareholders has also contributed to the change, said Weinberg. "From the shareholder point of view, they're more interested in controlling dilution. Also, they want to see real results and they're willing to pay cash to get them," he said.
The survey also found that the way in which companies grant executives both stock options and cash is changing.
Because of the instability of the market, many companies are granting options quarterly instead of annually. Speidel noted that granting stock options periodically allows companies to average the strike prices over the year.
Many cash bonuses are now tied to more traditional business performance metrics than in the past year. "Previously, cash bonuses were often discretionary. Now, there is a greater emphasis on incentive pay and companies are using measurable metrics. Those could be revenue growth or earnings related, or tied to a milestone such as completion of infrastructure," said Weinberg.
Another finding is that internet companies are granting equity to employees more carefully. "Stock options are still being used but companies are being more selective. They're determining who are the high-potential employees and which are true game-breaker positions - ones where having an outstanding person as opposed to an average one will make a big difference," he said.
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