Wary of thinning profit margins and a grim VC-backed IPO market, privately held companies are rolling back executive pay and total employee ownership, Syzygy Consulting Group reported this week.

In a survey of 278 private and pre-IPO companies, the California-based firm found that median CEO cash compensation declined 8.7 percent in 2008, while CEO stock options dropped by 4.2 percent. Aggregate employee ownership also fell, by 9 percent, the survey showed.

The software and biotechnology sectors saw the biggest cuts in CEO pay, with decreases of 11.5 percent and 10.6 percent respectively. Only the e-commerce sector showed gains, with employee ownership increasing by 25 percent, the survey found.

Syzygy CEO David Broman said the cuts were unprecedented in the nine years his firm has conducted the annual surveys. He attributed the decline to investors, VC firms and other board members holding the line on executive pay as the IPO market dries up.

"The path to liquidity is pretty much impossible now through a public offering," Broman said. "If there's any path to liquidity, it's going to be an acquisition through a larger firm."

Excessive executive compensation is often an M&A deal-breaker.

Broman said private companies could scrimp on executive pay for years as economic growth slows. Still, he added that private companies are not abandoning all pay practices of their public company counterparts, who continue to offer lucrative rewards to executives.

"It is somewhat troubling that there was no change in executive severances or CEO golden parachutes in 2008," Broman said. "It may seem like a double standard, but private companies are still willing to pay top dollar for the board guidance needed to succeed."