Insights into small private company exec pay
“As BV people, we’re always trying to find good compensation data so we can properly normalize financial statements,” says Stuart Weiss, CPA/ABV. “However, most of the good data focuses on companies that are too large for most of us. And even if we wanted to purchase such data, we’d spend thousands of dollars to get it.”
Now, fortunately, there are data available on small companies that include salary, bonus, equity, benefits, and perk data for CEOs, presidents, COOs, CFOs, and other categories of management. Weiss spoke with Wayne Cooper, chairman of Chief Executive Group, whose firm developed a compensation product for businesses of $10 million in sales and below, which is the market for most business valuation professionals.
Weiss asked Cooper how the idea came about for a CEO compensation report for private companies. “About three years ago, we created a research group on behalf of our clients,” recalls Cooper. “This report came from our subscribers asking us for good information on private companies. There are about 5,000 public companies in the U.S. and there’s a lot of information on them. But there are about 3 million private companies and there wasn’t reliable data on compensation trends and best practices for those firms. Their boards and the CEOs wanted that information to benchmark themselves and their companies. We went out and surveyed our audience and got a tremendous response. Over 1,200 CEOs filled out the survey that included very detailed information about their own compensation as well as their senior executive team.”
Cooper continues: “Given that some of our customers were small companies and didn’t need the data on the bigger companies, we did a version that just focuses on under $2 million, $2 to $5 million and $5 to $10 million in revenue. This version came out this past September.”
Interesting trends. “One thing to note is the variation in total CEO compensation between top quartile and bottom quartile,” says Cooper. “While the median was $225,000, the top quartile was $586,000 and the bottom quartile was $112,000. Another interesting point is how different the average (mean) is from the median. In this case, the top 10% skew the overall average. Some of them had very lucrative packages and may have sold the company that year, and got big equity gains that one year.”
Read more. The full interview with Cooper is in Weiss’s article, “Insights Into Recent Data on Small Private Company Executive Comp,” which is available as a free download from BVR. The report, Small (Under $10 Million Revenues) Private Company Executive Compensation Digest 2013-2014, is available at www.bvresources.com.