Presidio Pay Survey Finds Software Industry Chief Executive Officers Have Nearly 75% of Total Compensation Tied to Performance

Share Article

Presidio Pay Advisors "2007 Software Industry Executive Compensation Survey" presents findings on executive pay and ownership levels in 104 software companies.

Chief Executive Officers in the software industry received nearly 75% of their total direct compensation - base salary, annual cash bonus, and annual equity incentive grants - in the form of performance-based pay, according to Presidio Pay Advisors "2007 Software Industry Executive Compensation Survey." The overwhelming portion of at-risk pay is in the form of stock options and equity-based incentives, accounting for nearly $960,000 of the median CEO compensation of $1,344,000.

While most companies rely on stock options as the primary vehicle for delivering long-term incentives, there is a growing trend - consistent with the broader technology market - to utilize restricted stock. The Presidio Pay survey found approximately 35% of the companies granted restricted stock to members of their senior management team.

"Companies in the software industry historically accepted heavy stock option dilution loads in exchange for smaller employee cash compensation to retain as much cash in the company for as long as possible," said Brandon Cherry, a Principal at Presidio Pay Advisors. "However, with the changes to accounting for stock-based compensation, software companies are testing alternatives such as restricted stock and performance share plans at the executive level. Not only is there an opportunity to limit the accounting expense, but the nature of restricted stock requires fewer shares to be granted to replace the same value of stock options, reducing a company's stock overhang."

However, Cherry cautions that granting restricted stock simply for accounting and overhang benefits would be short-sighted.

"As a shareholder or member of a Compensation Committee, it is important to consider all factors when moving to a new equity incentive strategy. Companies should determine if restricted stock grants alone will reward an increase in shareholder value and serve as a means to attract and retain critical employee talent. Restricted stock grants, without any performance goals attached to the vesting or value of the grants, substantially waters down the shareholder benefit of granting equity incentives and provides little link to driving shareholder value."

Presidio Pay Advisors "2007 Software Industry Executive Compensation Survey" presents findings on executive pay and ownership levels in 104 software companies. The survey also found:

  • The average beneficial ownership for the CEO was 6.99%, with the majority of the ownership in the form of common shares owned outright.
  • The Internet Software & Services sub-industry led CEO compensation, paying over $2.6 million in total direct compensation, with the Application Software sub-industry being the next highest paying at $1.3 million.
  • The Chief Operating Officer was the second highest paid executive in the survey, earning total direct compensation approximately 6% lower than the CEO.

About Presidio Pay Advisors, Inc.

Presidio Pay Advisors is a San Francisco-based compensation consulting firm that provides companies with independent, strategic advice and support on a wide range of compensation issues. The firm's collective expertise encompasses a diverse array of human resources, finance, accounting, regulatory, and shareholder perspectives. You can find the Software survey and other industry compensation surveys on their website at http://www.presidiopay.com.

A complimentary synopsis of the Presidio Pay Advisors "2007 Software Industry Executive Compensation Survey" is available to the media to download, or by contacting Brandon Cherry at 415-438-3402. The survey is available to the public to purchase for $850 on Presidio Pay's website.

###

Share article on social media or email:

View article via:

Pdf Print

Contact Author

Brandon Cherry
Visit website