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October 1, 2013

2013 River Cities Salary Survey

Attached are the results of the 2013 River Cities Capital Funds Senior Management Compensation Survey. Twenty-four private-growth companies from the IT and healthcare sectors participated in this year’s survey. Firms provided data on compensation components – cash and stock – for senior management and independent directors. In addition, data was collected with respect to D&O insurance and audit expenses. Data was collected between June-July with compensation for 2013; TTM revenue and company head count is noted as close to December 2012 as possible. The survey data is illustrated in the eight attached exhibits.

Exhibit 1 – Numeric Summary:

    1. On average, CEOs have a base salary of $276K, target bonus of $131K and 3% in options (or 25% of all options granted).
    2. Target bonuses and commissions provided an average of 37% leverage over base salaries.
    3. On average, the VP of Sales had the most leverage over base salaries at 58%, followed by the CEO and VP of Business Development at 45% and 44% respectively.
    4. On average, option pools accounted for 11% of fully-diluted ownership for the senior management.

Exhibit 2 – “CEO Compensation versus Company Head Count”:

The analysis shows that CEOs who manage more people tend to receive a higher salary and higher total cash compensation.

Exhibit 3 – “CEO Compensation versus Company TTM Revenue”:

The analysis shows that CEOs who run companies with higher revenue generally receive more compensation. The relationship is slightly more substantial than that of the relationship between CEO salary and company head count.

Exhibit 4 – “CEO Option Ownership Percentage versus Size of Company”:

According to the analysis, the larger the company (measured by head count or TTM revenue), the less options the CEO received.

Exhibit 5 – “Senior Management Compensation versus Company Head Count”:

The analysis shows that the management teams (per senior executive) of large companies (measured by head count) tend to receive slightly higher salaries. The analysis also showed a meaningful relationship between senior management total compensation and the size of the respective company (measured by head count) – the larger the company, the higher the total compensation.

Exhibit 6 – “D&O Coverage and D&O Premium”:

The analysis shows a strong relationship between size of D&O Coverage and the D&O Annual Premium with few variances. The most popular coverage amounts are $3M and $5M, with 6 companies choosing each of those coverage amounts. The analysis also shows companies with higher TTM revenue tend to have higher premiums and only slightly higher coverage amounts.

Exhibit 7 – “Independent Director”:

The analysis shows that larger companies (by head count and TTM revenue) tend to offer less option ownership to independent directors given option ownership remuneration. There is less of a relationship between independent director cash remuneration and TTM revenue and little or no correlation between independent director cash remuneration and head count. Out of the 17 companies with independent directors, seven compensate with options only; six compensate with both cash and options; and four compensate with cash only. The average option and cash compensation were at 0.56% (options on a fully diluted basis) and $14K per director per year, respectively.

Exhibit 8 – “Audit Fees”:

The analysis shows that companies with higher head count and TTM revenue tend to have higher Audit Fees.

For further information about this report, please contact Parag Rathi (