Executive compensation in the life sciences industry rose slightly this year despite economic pressures that left many companies looking for ways to cut costs.
The average base salary for non-founder CEOs stood at $273,000 for 2009, up about 3.2 percent compared with last year, according to the newly released CompStudy produced by executive search firm J. Robert Scott and tax adviser Ernst & Young LLP.
Altogether, the survey polled 700 companies in the life sciences, clean-technology and high-technology industries throughout the United States.
Across all executive-level positions, not a single area experienced a decrease in base salary between 2008 and 2009. Heads of research and clinical development saw the smallest increases, each just below an average of 1 percent.
‘Remarkably Stable’ Environment
Erik Lundh, managing director with J. Robert Scott in San Francisco, said the numbers indicate a “remarkably stable” environment for executive compensation, given last year’s financial meltdown.
“This has been a challenging year to say the least for all industries, the life sciences included,” he said. “The traditional business model as it once existed has been called a little bit into question.”
Unlike years past, Lundh said much of the pay increase can be attributed to retention rather than performance.
“The most sought after executives are still very much in demand,” he said.
Slightly down, he said, is the equity component of the overall executive compensation package. Among non-founding executives, total average equity holdings were 17.1 percent of the fully diluted company, down from 18.2 percent in 2008. Non-founding CEOs hold an average of 5.8 percent of their companies.
Moving ahead, Lundh said he doesn’t expect equity holdings to continue a downward trend.
“The innovative nature of those organizations directly correlates with equity ownership in those companies,” he said. “I believe that will continue to be a powerful driver.”
The study also surveyed bonus payments among life sciences executives.
CEOs at life sciences firms received an average bonus of $48,000 in 2008, or 44 percent of their target bonus, down from 73 percent in 2007, according to the most recent data available.
Tough To Justify Bonuses
Tom Murphy, a San Diego recruiter with the executive search firm Solomon Page Healthcare & Life Sciences, said he’s noticed some reluctance among life sciences companies to award the kind of bonus payments they have in the past.
“People are having a virtually impossible time justifying some bonuses,” he said. “If you’re laying people off or not filling positions, it’s really hard to throw bones to people who are doing great things.”
Some, he said, are choosing to delay awarding bonuses until next year.
Meanwhile, Murphy said he expects many biotechs to continue to outsource much of their research and development work, freeing them from paying health insurance benefits to large pools of employees while also allowing them to pay their top executives a competitive salary.
“I think a lot of companies are going virtual as long as possible,” he said. “Some of these companies can raise $20 million on 10 people.”
