When it comes to incentivizing C-Level executives venture-backed firms come out on top, while PE-backed firms are not as competitive, and are more likely to underpay the best performing C-level executives, and overpay average performing managers, even falling behind publicly traded companies, says new research conducted by Chief Executive Group.
While base salaries, bonuses and equity incentives are competitive for median CEO and CFO positions, top quartile venture capital portfolio executives are better compensated than PE backed executives. And when it comes to technology positions like the head of R&D and CIOs, the gap between venture capital and private equity backed firms get even larger.
According to Wayne Cooper, co-author of the 2013-2014 CEO & Senior Executive Compensation Report for Private Companies, “While the median private equity portfolio CEO is better compensated than CEOs of other private owners, the top performers are underpaid on average, suggesting that many PE firms are overpaying average performers and underpaying outstanding performers.”
He added, “Senior executive compensation and incentive plans are key to attracting, retaining and motivating top talent, yet few private equity firms are properly aligning their portfolio company’s CEO and executive compensation programs effectively. There’s a lot of leverage in getting this right and applying competitive best practices.”