And not only are salaries similar to companies in the old economy, but the number of companies with share plans is also broadly comparable.
The Arthur Andersen study Directors’ Remuneration on flotation found that dot.com millionaires and large payouts can be attributed to the exponential share price growth that many companies had until recently. In fact, the report shows dot.coms are really no different from any other business, as there are opportunities to acquire shares at very low prices at many start-up businesses.
Andersens recommends that when deciding which business to join, individuals should look at the fundamentals of the business they are considering, rather than concentrating on whether it is new or old economy.
Partner at Arthur Andersen Bill Cohen, said: ‘People need to check that the business they are considering joining is stable and well managed and should not be seduced by the expectation of very high financial rewards from dot.coms.’
- Salaries for CEOs at newly floated dot.com companies are not significantly different to those in other newly floated companies. They range from £75,000 for the CEO of a small dot.com to £180,000 for one with a market capitalisation of over £100m. At other companies salaries ranged from £80,000 for the CEO of a small business to £184,000 for the CEO of a company with a market capitalisation of over £100m. (Median salary ranges used.)
- The salary for the finance director in many newly floated companies typically tends to be slightly higher than that of other directors below CEO level. However, in dot.com companies the median salary for finance directors is significantly lower than for other directors and is also around 20% lower than in other companies. This is often because the finance director is recruited just prior to flotation whereas other directors have been there for longer.
- Just under half the companies surveyed had some form of share option plan in place at the time of flotation. Share plans appear to be slightly more common in dot.com companies.
- Most companies with share option plans in place prior to flotation did not have performance conditions related to options. However, over 70% of companies, which granted options post flotation, including dot.com companies, made their options subject to performance targets.
- The majority of companies with share option plans disclosed details of limits on the maximum individual grant sizes. In most cases this is 4 x earnings in a 10 year period, although a few have a maximum grant size of 8 x earnings, and some plans will grant options up to a maximum of one to two times salary annually with no overall limit.
- In most cases options are not exercisable for three years, although in 10% of plans options may be exercised before this. This seems to be slightly more common in dot.com companies.
- Around 50% of all of the companies surveyed have an annual bonus plan. These are less common in dot.com companies ? only 40% had a plan in place at the time of flotation. The maximum award that may be made under these plans is typically 50% of salary.
- Flotation bonuses are not common and were only disclosed in four of the companies included in the research.
- Over 50% of companies disclosed the pension arrangements for directors with a median contribution of 12% for the CEO and 8.5% for other directors.
- 40% of companies disclosed the provision of a car or car allowance. The value of the car would typically be around £30,000. Where an allowance is paid this would typically be between £9,000 and £10,000 a year.
- Most commonly directors will have service contracts requiring 12 months notice.