Submitted by Priceonomics
There have been a flurry of IPOs in 2018, many for companies in the Technology sector. Previously, we looked at the compensation of Fortune 100 company CEOs and we were curious to see how these compared to CEO compensation at Tech companies at their IPO.
We looked at companies with an IPO in 2018 and the Executive Compensation data in their S-1 filing. Keep in mind, this is annual compensation (salary plus equity awards that year), not the total amount of equity the CEO or founder might previously have earned (for an analysis of founder equity stakes at IPO, please see this past analysis)
The table below shows CEO compensation at these companies in Fiscal Year 2017, ranked by total compensation.
Dropbox’s Drew Houston is, by a significant margin, the highest paid CEO, with over $110M in compensation in the year. By comparison, the highest paid CEO of the Fortune 100 companies, Jeff Bewkes of Time Warner, made significantly less, at $49M in annual total compensation.
The base salaries for CEOs here are mostly between $100K to $500K, with the exception of Zscalar and i3 Verticals, whose CEOs are both taking under $25K in total compensation. In fiscal year 2017, Gregory Daily (CEO of i3 Verticals) elected to receive only a nominal salary equal to the employee premiums for health insurance.
Across all these compensation packages, the base salary represents, on average, 42% of total compensation. If we compare this to the distribution for Fortune 100 CEOs (base salary is 8% of total compensation), it’s relatively low. However, we do see there are obvious outliers - Dropbox CEO Drew Houston’s base salary represented only 0.3% of his overall compensation.
Next, we compare the CEO’s compensation to the revenue of the company for the previous fiscal year (FY17).
We can see here there is a slight positive correlation between the CEO’s total compensation and annual revenue (R-squared = 0.33). Dropbox, with the highest paid CEO, is the only company with over $1B in revenue for the fiscal year preceding their IPO. Pluralsight had the second highest paid CEO, but only ranked 15th in terms of revenue, at $167M. Sonos, however, had the second highest revenue, $993M, but their CEO was 19th highest paid.