Pay practices in publicly traded Cleantech companies resemble those of start-ups, with a significant amount of executive compensation “at risk” in the form of equity and other performance based incentives, according to a new study released by Presidio Pay Advisors.
75% of the median CEO pay package is contingent upon company and/or individual performance, according to the San Francisco-based compensation consulting firm.
The study also revealed a surprising finding that companies with greater annual revenue use the most “at risk” pay. Traditionally, larger and more established companies have a higher proportion of executive pay guaranteed than “at risk”, but Cleantech companies with annual revenue in excess of $1 billion have over 78% of CEO pay dependent on company or CEO performance.
Despite the start-up characteristics, these companies are far from early stage with a median of 15 years as a public company.
“Many of these established Cleantech companies have a mix of pay elements we expect to see in start-ups, where the focus is on conserving cash,” says Kyle Holm, a principal at Presidio Pay Advisors. This unusual trend indicates that companies of all sizes see substantial growth opportunities in the Cleantech industry.
The analysis also showed founder-CEO ownership in the Cleantech industry to be much higher than current market levels overall, particularly for established companies. Founder CEOs of Cleantech companies held a median of 8% of total shares outstanding. By comparison, an earlier study by Presidio Pay Advisors revealed median founder-CEO ownership upon initial public offering has plunged to less than 3% of total shares outstanding over the past seven years. And, in fact, there is very little difference between ownership levels of founder and non-founder CEOs at the time of IPO.
By contrast, Holm says, “In Cleantech companies, founder CEO ownership is eight times greater than non-founder CEO ownership, which is reminiscent of start-ups we were advising in the late 1990s.”
Other major findings include:
- Founder CEOs received 56% less in total direct compensation than non-founders.
- Stock option grants have been decreasing slightly over past three years but are still the predominant equity incentive vehicle.
- Founder CEOs received a median stock option grant with a fair market value of approximately $312,000, while non-founder CEOs received a median stock option grant with a fair value of approximately $712,000.
Companies in rapid growth industries often struggle to find compensation strategies that strike the right balance between leveraging high growth potential and offering the stability of established company pay packages.
“As more and more types of companies throw their hat into the Cleantech ring, narrowing down a relevant peer group will become more difficult” Holm cautions. “We always advise paying attention to size, ownership structure and industry before settling on a peer group to compare executive pay.”
Presidio Pay Advisors’ findings are based on an analysis of Cleantech
compensation and financial data from the firm’s newly released
Cleantech Pay ReporterTM.
Loading...