Expensive CEOs at Venture-backed Companies
I had an interesting conversation with the CEO of a venture-backed company recently where he “explained” why CEOs of such firms need to be paid more now than an inflation-adjusted increase from, say, five years ago. He argued that in the absence of public market exits that the risk/return tradeoff for being a CEO at a venture-backed firm is no longer what it once was. Put differently, cash (in salary) is king, and anyone who relies on options is a chump in the face of the risk of running a startup staying constant, or even increasing.
I don’t entirely disageee, but to the extent that the comp for venture-backed CEOs skews in any significant way toward cash it augurs ill for creating and financing cost-effective startups. But data today does corroborate his point, with the following having been released by VentureSource:
1…the CEOs of [startup] companies earn about $10,000 more a year than they did in 2004, and about $35,000 more than in 2003. Overall, the CEOs are earning $260,000 in total salary, bonus and commission compensation, based on an annualized median.