Pardon My Raise

While salaries rose for biotech executives and chieftains of firms backed by venture capital, that wasn't any big whoop. Plummeting stock prices an...
Lisa YoonSeptember 30, 2002

The fact that biotech executives saw their salaries rise in 2001 probably didn’t provide consolation for many of them. That’s because drops in their stock-option values and cutbacks in their perks overrode salary boosts and pushed their total compensation packages down, according to the latest executive-compensation survey released last week by BioWorld.

The average salary-plus-bonus for biotech CFOs in 2001 was $278,000, according to the newspaper’s Executive Compensation Report 2003.

The average base pay of the 227 chief executives studied rose 9.1 percent, to $513,000 for 2001. Meanwhile, the average potential realizable value of stock options for CEOs decreased to $1.7 million from $2.2 million, the average value of long-term compensation fell to $1.3 million from $1.9 million, and exercisable in-the-money options fell to $5.2 million from an average of $6.8 million. “Other” compensation, which includes various perks, fell 52 percent, from $119,000 to $57,000.

The average total package for research-and-development heads was $299,000, while business/corporate development officials earned $252,000. General counsels earned $314,000 on average.

The industry’s big winner was ImClone Systems’s embattled ex-CEO Samuel Waksal, who grabbed the highest total direct compensation amount among the 227 full-year CEOs included in the report. Waksal, who pleaded not guilty to insider trading, obstruction of justice, and other allegations, earned $1 million in salary and bonus for the year and $72 million from the exercise of options on 2.3 million shares, which he may or may not have sold.

The report includes data taken directly from proxy statements of 259 companies on the compensation packages of CEOs, CFOs, R&D heads, heads of business and/or corporate development, and top legal officers.

Meanwhile, another survey shows a similar trend in executive compensation for companies supported by venture capital. According to VentureOne, a tracker of the VC industry, base salaries for executives at venture-backed companies rose slightly, while bonuses declined.

The median base pay for CEOs increased to $200,000 during the first half of this year, up about 5 percent compared with the same period last year, according to the study. (Although the researchers say they did in-depth interviews with CFOs and CEOs, they don’t reveal how many executives were interviewed.)

Vice president- and director-level positions experienced similar increases in base pay. However, their bonus amounts showed the greatest decrease in dollar terms, falling to $25,000 from a median of $32,450.

“Since bonuses are often tied to individual or company performance, they are most responsive to changing market conditions,” explained John Gabbert, VentureOne’s vice president of worldwide research. “Decreases of this kind are to be expected in a difficult economic environment.”

Some venture-backed firms are even cutting back on offering bonuses altogether. This is especially true in areas that were hit the hardest by the dot-com bust. Take Northern California: in that region, VentureOne said, the percentage of companies offering bonuses fell from 73 percent to 37 percent in 2002.

CFOs on the Move

>>Northwest Airlines said Mickey Foret stepping down as EVP, CFO, chairman, and chief executive… Airline named Bernard L. Han, formerly America West Airline’s EVP and CFO, to replace Foret as EVP and CFO… Doug Steenland, president of Northwest Airlines, will assume the added duties of chairman and CEO, NWA Cargo… Foret signed on in 1998 to a four-year contract, which is now up, said the company… He is retiring to spend more time with his family …
CFO PeerMetrix:Northwest vs. America West

>>Michael O’Reilly, EVP and chief investment officer of Chubb Corp.,,was named to the additional position of interim CFO… O’Reilly succeeds Weston M. Hicks, who resigned to become EVP of Alleghany Corp., where he will head Alleghany’s insurance holdings and investment portfolio…

>>Tool manufacturer Snap-on Inc. tapped Cabot Microelectronics Corp. finance chief Martin M. Ellen as SVP and CFO… Before Cabot, Ellen was SVP and CFO of Pepsi bottler Whitman Corp….
CFO PeerMetrix:Snap-on Inc. vs. Cabot Microelectronics

>>Cutting-instrument maker Acme United Corp. taps Paul G. Driscollas CFO, VP… Driscoll was director of finance and operations at Ernest & Julio Gallo in Tokyo… Earlier in his career, he was assistant controller of Paris-based Sanofi SA… Driscoll replaces Ronald P. Davanzo, who will be leaving Acme United to pursue other interests…