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CIO Roundtable 10-12
 

CIO Roundtable 10-12

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    CIO Roundtable 10-12 CIO Roundtable 10-12 Presentation Transcript

    • CIO Breakfast RoundtableCompensation Trends DiscussionKen WechslerDirector; Southern California Market LeaderOctober 11, 2012
    • Topics for Today> Key indicators> Hiring and turnover trends> Salary budgets> Cash incentive plans> Equity strategies and practices> Questions and answers 1
    • Key Indicators
    • US Economic Forecasts > Overall economic growth remains sluggish: Q4 2011 growth rate 4.1%; Q1 2012 growth rate 2.0%; Q2 2012 growth rate only 1.5% > The overall unemployment rate is dropping, but for those unemployed, they may stay unemployed longer Category 2008 2009 2010 2011 2012 GDP Year-Over-Year -0.3% -3.5% 3.0% 1.7% 1.8%* Unemployment % 5.8% 9.3% 9.6% 8.9% 8.3%***Q2 2012 US Commerce Department, July 2012**July 2012Sources: United States Bureau Economic Analysis, 3Congressional Budget Office and Bureau of Labor Statistics
    • Unemployment Rates > Both California and San Diego County unemployment rates have been higher than the overall US rates for the last few years, yet they are clearly improving 12.5% 12.5% 12.0% 11.7% 11.5% 10.3% 10.7% 10.4% 10.4% 10.5% 9.3% 9.5% 9.8% 9.7% 8.5% 9.0% 8.2% 7.5% 6.5% 5.5% Dec Jan Mar Dec Mar Dec Mar May Jan May Jan May Jan Mar May Jul Aug Sep Oct Jul Aug Sep Oct Jul Aug Sep Oct Feb Apr Feb Apr Jun Feb Apr Feb Apr Jun Nov Nov Jun Nov Jun 2009 2010 2011 2012 California Overall United States San Diego 4Source: United States Bureau of Labor Statistics
    • Stock Price Recovery > The Dow Jones (DJI), NASDAQ (IXIC) and Biotech Indices (NBI) are close to 12-month highs > Apple recently set a record for company value at $660B. Previous record was Microsoft at $621B in December 1999 50% 40% 30% 20% 10% 0% -10% -20% -30% -40% -50% DJI IXIC NBIStock price performance relative to 7/31/2009 5Source: Yahoo! Finance
    • Hiring and Turnover
    • Hiring Trends – Life Sciences and Technology> San Diego companies are now in competitive talent wars, yet slightly less aggressive Life Sciences Technology San Overall San Overall Method Diego* Bay Area US Diego* Bay Area US Hiring 0% 1% 2% 3% 0% 2% Freeze Very Selective 35% 35% 38% 36% 27% 30% Hiring Normal 55% 43% 42% 46% 53% 51% Hiring Aggressive 10% 21% 18% 15% 20% 17% Hiring*55% of life sciences and 49% of technology companies anticipate growing theirworkforce over the next 12 months; conversely only 6% of life sciencescompanies and 14% of technology firms expect their workforce to decrease insize 7Source: Radford Trends Report – Q2 2012
    • Turnover – April 2011- April 2012 > Voluntary turnover is rapidly increasing, especially for the San Diego market 22.0% 20.9% 20.0% 18.0% 17.2% 17.1% 16.6% 16.4% 8.0% 16.0% 14.5% 14.0% 5.9% 6.6% 7.0% 6.9% 12.0% 4.4% 10.0% 8.0% 12.9% 6.0% 11.3% 10.1% 10.5% 9.6% 9.5% 4.0% 2.0% 0.0% San Diego Bay Area Overall US San Diego Bay Area Overall US Life Sciences Technology Voluntary Invountary 8Source: Radford Trends Report – Q2 2012
    • Silicon Valley Sees Growth in Jobs > Current unemployment stands at 8.3% > 2012 Silicon Valley Index found job growth far outpaced the country as a whole - Regionally added 42,000 or nearly 4% compared to nationwide increase of 1% > Key industries adding jobs include cloud computing, mobile devices, mobile apps, internet companies and social media > Silicon Valley non-technology workers still feeling the pain of the economic collapseSource: Associated Press 6/8/2012 9
    • Salary Budgets
    • 2012 Overall Salary Increase Budgets > Budgets in life sciences historically (and still in 2012) run slightly ahead of technology San Diego Bay Area Overall US Life Life Life Method Sciences Tech Sciences Tech Sciences Tech 75th Percentile 4.0% 3.9% 4.0% 4.0% 4.0% 4.0% 50th Percentile 3.6% 3.0% 4.0% 3.4% 3.5% 3.0% 25th Percentile 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% Average 3.8% 3.3% 3.7% 3.4% 3.6% 3.4%*Undiluted 11Source: Radford Trends Report – Q2 2012
    • Cash Incentive Plans
    • Cash Incentives > Almost all participants are expecting to pay bonuses in 2012 Life Criteria Tech Sciences Companies Expecting to Pay Bonuses in 2012 96% 96% % of Total Population Receiving Bonus 64% 76% Payment (down around 10 percentage points) Life Size of Payments Relative to Last Year Tech Sciences Similar 67% 71% Larger 18% 18% Smaller 15% 11%Source: Radford Practices Reports 2012 13
    • Cash Incentives – Individual Payouts > Most companies emphasize both overall company and individual performance based on the level within the organization when determining actual award payouts Life Sciences Technology Level Company Individual Company Individual CEO 85% 15% 80% 20% Executives 70% 30% 75% 25% Directors 55% 45% 60% 40% All Other Employees 40% 60% 50% 50% > Individual award segments should have enough differentiation to adequately reward top performers % of Individual Target Performance Rating Award Level Top 10% 125% to 150% Next 20% 110% to 125% Middle 50% 75% to 100% Bottom 10% No Awards IssuedSource: Radford 2012 Overall Practices Report 14
    • Equity Strategies and Practices
    • Equity Vehicle Mix > Technology companies have shifted to using more restricted stock in their annual equity programs, with general industry companies placing an even larger emphasis on restricted stock Market Equity Vehicle Mix – Ongoing Grants Technology General Industry Stock Stock Options RSUs Options RSUs Level Only Only Both Only Only Both Executive 20% 35% 45% 5% 60% 35% Director 20% 50% 30% 5% 80% 15% Manager 15% 80% 5% 5% 85% 10% Senior IC 15% 80% 5% 1% 94% 5% IC 4% 95% 1% 1% 94% 5% Support 2% 97% 1% 1% 94% 5%Source: Radford 2012 Global Long-Term Incentives Report 16(Cal companies).
    • Grant Sizes > Similar to base salaries, long-term incentive values are higher in the technology industry than in the general industry Ongoing Equity Grants - 50th Percentile Technology General Industry As a % of As a % of Level Value Salary Value Salary Executive $585,000 175% $535,000 140% Director $43,500 25% $27,000 18% Manager $19,500 16% $10,000 10% Senior IC $22,000 16% $12,500 10% IC $9,000 10% $5,000 6% Support $1,000 2.5% $3,000 5%Source: Radford 2012 Global Long-Term Incentives Report 17(Cal companies).
    • Equity Vesting > The vesting schedules between technology and general industry are comparable with the majority having a 4-year vest Ongoing Vesting Schedule Level Technology General Industry > 5-year vest - 6% > 5-year vest - 9% Stock Options > 4-year vest - 77% > 4-year vest - 68% > 3-year vest - 17% > 3-year vest - 18% > 5-year vest - 6% > 5-year vest - 11% Restricted Stock > 4-year vest - 58% > 4-year vest - 50% > 3-year vest - 32% > 3-year vest - 39%Source: Radford 2012 Global Technology Practices Report 18(Cal companies).
    • Equity Vehicle Prevalence – Technology> Companies located in Southern Calif. are utilizing RSUs more so than companies located in the Bay Area> Additionally, as you move lower in the organization we see companies in both regions placing a higher emphasis on RSUs Percent of Employees Receiving Different Vehicles Southern Calif. Bay Area Options RSUs Options RSUsPosition/Level Only Only Both Only Only BothCEO 6% 44% 50% 17% 35% 48%Senior Vice President 8% 50% 42% 16% 38% 46%Vice President 9% 56% 35% 12% 42% 47%Director 19% 77% 4% 13% 62% 25%Manager 8% 88% 4% 8% 88% 4%Senior Individual Contributor 1% 98% 1% 9% 89% 2%Individual Contributor 2% 97% 1% 4% 95% 1% Source: 2012 Radford Global Long-Term Incentive Report 19
    • Equity Vehicle Mix – Technology> Companies have been reluctant to move performance-based RSUs beyond the Vice President level in the organization Value Delivered via Each Vehicle (Average Mix) Southern Calif. Bay Area Stock Time Perf. Stock Time Perf.Position/Level Options RSUs RSUs Options RSUs RSUsCEO 34% 47% 19% 41% 42% 17%Senior Vice President 31% 49% 20% 38% 45% 17%Vice President 27% 59% 14% 34% 50% 16%Director 23% 73% 4% 23% 67% 10%Manager 11% 88% 1% 10% 82% 8%Senior Individual 4% 96% 0% 10% 90% 0%ContributorIndividual Contributor 3% 97% 0% 5% 95% 0% Source: 2012 Radford Global Long-Term Incentive Report 20
    • Annual Value Delivered – Technology> Below the executive level, Southern Calif. companies are delivering more value to their employees on an annual basis than Bay Area companies> The values as a percent of base salary in Southern Calif. are also higher than in the Bay Area Annual Value Delivered ($000s) – 50th Percentile Southern Calif. Bay Area Southern Calif. as a Value as a % Value as a Mult. ofPosition/Level Value of Salary Value % of Salary Bay AreaCEO $1,801.8 265% $2,726.8 463% 0.7xSenior Vice President $479.0 132% $724.9 192% 0.7xVice President $443.7 154% $461.0 152% 1.0xDirector $56.4 35% $39.0 23% 1.4xManager $27.1 24% $17.0 14% 1.6xSenior Individual $32.5 27% $13.5 12% 2.4xContributorIndividual Contributor $20.6 21% $7.6 9% 2.7x Source: 2012 Radford Global Long-Term Incentive Report 21
    • New-Hire Value – Technology> Similar to the ongoing grants, Southern Calif. companies are providing more equity value to employees at the time of hire than Bay Area companies> In Southern Calif., companies are generally providing new hire awards that are between 1.5x and 2.5x the ongoing awards while in the Bay Area the new hire grants are roughly between 2x and 3x the ongoing grants New-Hire Value ($000s) - 50th Percentile Southern Calif. Bay Area Southern Multiple of Multiple of Calif. as a Annual Annual Mult. ofPosition/Level Value Value Value Value Bay AreaDirector $77.7 1.4x $85.7 2.2x 0.9xManager $63.0 2.3x $39.3 2.3x 1.6xSenior Individual $73.3 2.3x $36.7 2.7x 2.0xContributorIndividual $35.3 1.7x $24.8 3.2x 1.4xContributorSource: 2012 Radford Global Long-Term Incentive Report 22
    • Continued Emphasis on RSUs > It has been a slow-and-steady transition but RSUs have replaced stock options as the vehicle of choice Historical RSU Allocation as a Percent of Total Pool (using 3:1 option to RSU conversion ratio) 80% 69% 70% 62% 60% 57% 53% 50% 46% 40% 30% 20% 10% 0% 2007 2008 2009 2010 2011 YTDSource: Radford’s Burn Rate/Overhang Proprietary Database 23
    • Chief Information OfficerCompensation Program Trends
    • CIO Compensation Trends > While overall cash compensation has remained flat, there has been a wholesale shift towards greater use of equity, equally spilt between stock options and restricted stock units (RSUs). Compensation Package Change 2010 2012 Component 25th 50th 75th 25th 50th 75th Base Salary $ 216.2 $ 250.0 $ 300.0 $ 210.1 $ 250.0 $ 310.0 Bonus Target 34.4% 40.0% 50.0% 30.0% 40.0% 55.0% Total Cash $ 284.1 $ 354.3 $ 441.7 $ 274.1 $ 354.2 $ 473.5 Annual Equity $ 97.9 $ 185.8 $ 373.0 $ 116.7 $ 245.3 $ 519.5 Grant * Total Direct $ 336.0 $ 456.4 $ 724.0 $ 332.8 $ 473.4 $ 860.9 CompSource: Radford 2010 & 12 Global Technology Survey 25* Equity eligibility: 91.7% - 2010 and 83.8% 2012
    • CIO Compensation – By Organization Size > Clearly the compensation package varies significantly by the size of the organization. Compensation Package Annual Revenues Component < $200M $200M-$1B > $1B Base Salary $208.0 $ 245.0 $300.0 Target Bonus 30.0% 35.0% 50.0% Target Total Cash $254.2 $ 325.3 $462.0 Annual Equity $55.8 $ 130.6 $177.1 Grant * Total Direct Comp $259.9 $ 458.1 $641.1Source: Radford 2012 Global Technology Survey 26* Equity eligibility: 83.8% 2012
    • Questions?Thank You!Ken Wechsler, ken.wechsler@radford.com, + 1.858.755.8675