CEO Equity Holdings in Companies Going Public Have Plunged

June 3, 2009 (PLANSPONSOR.com) - A new analysis of IPO compensation and financial data from Presidio Pay Advisors shows that over the past seven years, founder CEO equity holdings in companies going public have plunged.

As a result, there is very little difference between ownership levels of founder and non-founder CEOs at the time of initial public offering (IPO), according to a press release. Presidio says “This and other changes in compensation practices reinforce the need to review compensation programs well in advance of going public.”

Data from the San Francisco-based compensation consulting firm’s newly released IPO Pay Reporter, an executive compensation database that allows users to create customized data sets and reports, reveals that median founder CEO ownership at IPO fell to under 3% of total shares outstanding in 2008. This is down sharply from a high of over 10% in 2002. Conversely, non-founder CEO ownership has remained relatively consistent at slightly greater than one percent of total common shares outstanding at IPO, the press release said.

The analysis also found that the mix between options and common stock ownership among all executives has undergone a transformation. In 2002, executive officers had a stronger link to investor success, with over 85% of their ownership in the form of common stock and less than 15% in stock options. However, by 2008, nearly 40% of executive officer ownership was stock options.

Other findings of the Presidio study include:

  • Companies in 2008 awarded and reserved fewer shares for grants to employees; median stock option overhang was at its lowest level in seven years.
  • Since 2005, a 24% rise in median CEO base salary has been offset by a 25% decrease in annual cash bonuses, leaving total cash compensation essentially unchanged for both founder and non-founder CEOs.

More information is at https://ipo.presidiopay.com .

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