Matt Quinn

Compensation for IT Start-Up Execs Plateaued in 2003

 

August 17, 2004 -- In yet another indication that industries spawned by the "New Economy" have completely returned to pre-"bubble" fundamentals, pay for top executives at information technology start-ups has plateaued, according to a new survey.

The average pay for senior executives at privately held IT firms inched up less than 2 percent in 2003, reported the annual compensation survey by executive search firm J. Robert Scott, law firm Wilmer Cutler Pickering Hale and Dorr LLP, and Ernst & Young LLP. Compared to the large increases of the dot-com era, this was essentially flat, noted the study. The slight increase continued the downward trend from 2002 and 2001, when base salaries increased 2.9 percent and 7.9 percent respectively.

The study also found that executive compensation in the IT industry has become increasingly performance-based. The average bonus across all positions grew by 15.6 percent in 2003. The percentage of bonus-to-cash compensation has risen steadily over the past four years, growing to 21.9 percent in 2003, up from 19.3 percent in 2002 and 15.7 in 2001.

"As little as four years ago, cash was being distributed rather indiscriminately to start-up companies," said Aaron Lapat, managing director of J. Robert Scott. "Today, early staged technology firms have returned to offering salaries that are more realistic for start-ups and are paying executives for reaching real performance milestones."

Chief executives earned $198,000 on average in 2003, compared to $192,000 the prior year. Bonuses increased to $57,000, up from $50,000.

Despite compensation being flat overall, the highest paid executives still managed to grab the biggest raises. Executives in the top 25 percent earned $334,000 in salary and bonuses, up more than 11 percent from 2002.

Matt Quinn contributes to the Wall Street Journal's corporate finance blog. He has also written extensively about banking and corporate finance for publications including Inc., American Banker, and Financial Week. He lives in Brooklyn, New York.