Benefits October 26, 2006

IT and Life Sciences Growth Boosts CEO Pay

October 26, 2006 (PLANSPONSOR.com) - Growth in venture-backed Information Technology (IT) and Life Sciences companies has fueled a boost to total cash compensation in 2006 for CEOs in both industries, according to newly released reports.
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CEOs in the IT sector saw a 4.3% increase in base salary and an overall 17% increase in total cash compensation in 2006, while Life Sciences CEOs reported a 5.1% increase in base salary and a 16% rise in their total cash compensation, according to a press release on the reports. For IT companies, average CEO salaries increased from $211,000 in 2005 to $220,000 in 2006.

The average target bonus for IT CEOs is $93,000 in 2006 versus $57,000 in 2005, while the average target bonus for the Life Sciences CEOs is $94,000 in 2006, an increase of $39,000 from 2005, the release said.

The reports found that incentive stock options continued to be the most common form of equity granted at IT companies, making up 62% of total equity grants. Eighty-two percent of Life Sciences companies surveyed used stock options in 2006, while only 4% used restricted or common stock.

Other findings of the reports include:

  • Average equity holdings across the 13 executive positions surveyed for Life Sciences companies totaled 16.2%, an increase from 14.5% in 2005.
  • In Life Sciences companies, a non-founding CEO commands a 22% premium in total cash compensation over the founding CEO.
  • Approximately 66% of the non-founding CEOs of Life Sciences companies in the survey have a severance package with a median of 12 months.
  • Total cash compensation for the IT CEO generally rises from $260,000 in companies with 20 full-time employees to $397,000 at the largest companies surveyed with greater than 75 full-time employees.

The 2006 Compensation and Entrepreneurship Reports in IT and Life Sciences, co-sponsored by Ernst & Young LLP’s Strategic Growth Markets Practice, J. Robert Scott Executive Search, and Wilmer Cutler Pickering Hale and Dorr LLP, detail findings from a survey with more than 1,500 executives representing over 300 companies from across the country in five industry segments: Software and Communications, Hardware, Semiconductors and Electronics, Services, Consulting and Integration, and Content and Information Providers.

For more information or a copy of the reports, contact Nicole Thomas with Ernst & Young at Nicole.Thomas@ey.com .

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