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Companies Need to Up Their Pay Practice Game

Many companies follow best practices for motivating CEOs and other senior executives, but most don’t.

Larger private companies, along with private equity- and venture capital-owned companies, as well as employee-owned companies, are likely to follow best practices, but others are lagging behind. Our survey found that 40 percent of companies do not have formal long-term incentive plans, and among those that do, a mere 23.5 percent use performance-based vesting rather than time-based vesting.

This is not consistent with public company practices.

Not surprisingly, our survey found that larger companies by revenue behave more like public companies (see chart). Eighty-five percent of companies with revenues from $250 million to $499.9 million led the pack, followed by 80 percent for $1 billion companies and 62 percent for those between $500 million and $999.9 million.

In terms of ownership, 80 percent of employee-owned companies reported formal annual incentive plans, followed by PE-owned (73 percent) and VC-owned (63 percent) companies. Other types of ownership, such as sole proprietorships, partnerships and family businesses are far behind the top three.

For more information please visit www.ChiefExecutive.net/compreport