2022 Senior Management Compensation Survey
Attached are the results of the 2022 RC Capital Senior Management Compensation Survey. Thirty-five private-growth companies from the Healthcare and IT sectors participated in this year’s survey. Companies provided data on compensation components—cash and stock—for senior management and independent directors, as well as data with respect to D&O insurance and audit expenses. Data was collected from RC Capital, Mutual Capital and TT Capital Partners portfolio companies. Company head count and TTM revenue are noted as close to December 2021 as possible.
The average base salary of CEOs is $323k, with a target bonus of $172k and 3.8% in options (or 21.8% of all options granted). Average salary and target bonuses however remained relatively flat compared to 2021. Total cash compensation saw the biggest change YoY with total cash compensation rising by nearly 3% leading to a slight increase in total compensation.
While typically larger companies (measured by revenue and head count) generally pay higher salaries, head count did not correlate as strongly with compensation in our dataset and higher revenue companies showed only a slight correlation with higher cash compensation. Likely factors contributing to this dynamic are industry focus and geographic location. In terms of ownership, CEOs of larger companies with higher revenue and head count receive fewer options given the maturity of the company and higher value of the options.
Similar to the CEO compensation data, this analysis suggests that the total compensation of senior management teams has little correlation with head count and only a slightly higher correlation with revenue. On average, target bonuses and commissions provided 34% more compensation leverage over base salaries. VP Sales had the most variable compensation over base with 49%, respectively, followed closely by CEO (46%), CRO (43%), and CFO (33%).
D&O plans range from $1M – $5M in coverage, the most common plan being $5M. Not surprisingly, the higher the coverage, the higher the premium paid. However, on a few occasions, premium paid with the same coverage varied in cost.
According to the analysis, larger companies tend to offer a slightly smaller percentage of option ownership given the higher value of the options. Out of 17 companies with independent directors, nine compensate with options only, five companies compensate with cash only and three compensate with both cash and options. The average option and cash compensation were 0.71% (options on a fully diluted basis) and $38.6k per director per year, respectively.
Companies with greater head count pay substantially higher audit fees. TTM revenue has a minimal impact on audit fees. Fees range from $21k to $135k; the average amount paid for audit fees is $53k.
Given the new office/remote flexibility post Covid, we surveyed participants to see how they are continuing to handle workplace flexibility. Only 11% of companies surveyed require employees to be in the office five days per week; 61% of companies require employees to be in the office between two and four days per week; and 28% of companies surveyed offer complete flexibility allowing employees to work from home or in person.
The average 401K match for employers surveyed is 3% of the employee’s salary, ranging from 2% to 4%.
Parental leave policies range anywhere from no leave policy at all, six weeks of leave, eight weeks of leave and 12 of weeks leave. The most common offering is 12 weeks of leave, offered by 53% of companies. Followed by 29% of companies offering no leave at all, 12% of companies surveyed offering six weeks of leave and 6% of companies offering eight weeks of leave.
Key Man Insurance Policy
The key man insurance policies range anywhere from $250K in value to $3M in value. The most common insurance policy plan being $1M dollars per executive. 19 companies were surveyed and only 26% of companies had key man insurance policies and the rest opted to not obtain insurance.
For further information about this report, please contact Britney Hamberg.