According to the survey, board members were granted an average 0.45% (0.50% for the chairperson) of fully diluted equity to join the board. Outside board members held an average of 1.61% of the company’s equity (2.65% for the chairperson). Most outside board members at private companies did not receive any cash compensation.
The survey results did indicate some variation in compensation packages for CEOs depending on geography. CEOs in California still enjoy the highest base salary at $296,000 compared to $294,000 in the West/Midwest regions, and $263,000 in New England.
With expected bonus layered on top of the base salary, the West/Midwest leads with total cash compensation of $405,000, followed by California at $373,000. Mid-Atlantic CEOs also receive higher equity stakes at 6.6% of fully diluted ownership compared to 4.83% in New England, and 4.52% in California.
California also leads the regions in base salary for CSOs, with an average of $224,000 compared to $155,000 in the Mid-Atlantic and New England at $194,000. On the other hand, New England is the leader in expected bonuses with $41,000 followed by the Mid-Atlantic at $40,000 and California at $38,000. New England companies also pay a premium for clinical research heads, with an average cash compensation of $289,000 compared to California’s $272,000.
Heads of sales and marketing in New England received the highest total cash compensation packages, when compared to equivalents in other regions, averaging $266,000, of which $196,000 is base salary. This indicates a high demand for executives in that region. Sales and marketing executives in the Mid-Atlantic follow with total cash compensation of $248,000, including a base salary of $189,000, while California had total cash compensation of $218,000, including a base salary of $172,000.
Salaries Equal Growth
As companies increase in size, the top executive positions also see an increase in total cash compensation packages. CEOs at the smallest companies, 10 or fewer employees on average, will earn $338,000 if target bonuses are met, compared to CEOs at larger companies with over 40 employees, earning as much as $429,000 in total compensation. This equals a 27% premium. CSOs follow the same trend, with a total cash compensation of $211,000 if bonus targets are met for smaller companies, compared to $264,000 for larger companies, adding up to a 25% premium.
As companies expand and the number of employees grows, the executives’ equity ownership gets smaller. CEO fully-diluted equity ownership decreased from 7.04% for smaller companies to 4.35% for larger companies, or a 38% decrease. CSO equity ownership also followed a similar decrease of 37% from 1.71% ownership in smaller companies to 1.07% ownership in larger companies.
Life science CEOs continue to outpace their medical-device counterparts in annual base salary and target bonus. In 2007, the average base salary for a life science CEO was $286,000, compared to $262,000 for medical-device company CEOs.
Expected bonuses of $108,000 for life science CEOs also outpaced those of medical-device CEOs, which average $76,000.
Heads of sales and marketing at life science companies earn the second highest salary of all executives, with total cash compensation of $276,000. Nearly a quarter of this is expected bonus. At medical-device companies, sales and marketing heads earned average total cash compensation of $219,000, 22% of which is expected bonus.
Locating talent can be a challenge. Our 2007 survey results indicated that the majority of executives other than the CEO are found either by referral of the CEO or other executives. Investors have the most influence over the hiring of CEOs, business development executives, and CFOs. With all other positions, however, investors referred the lowest percentage of executives.