- The Washington Times - Wednesday, August 23, 2000

NEW YORK (AP) Internet companies still use stock options to woo executives, but they are increasingly compensating officers the Old Economy way: with cash salaries and bonuses.
Web-based businesses are paying out 13 percent more in cash than last year to top management, reflecting a tight job market and an increased focus by Internet companies to move toward profitability, a PricewaterhouseCoopers study released yesterday says.
At the same time, Internet companies are awarding executives just 1 percent more in stock options than the year before, the accounting firm said.
"The dot-coms of the world have gotten some discipline," said Edward J. Spiedel, a director at PricewaterhouseCoopers' Unifi Network, which wrote the study of pay practices at 123 Internet companies.
The cash portion of pay packages now often includes short-term incentives tied to the company's performance. To do that, many Internet businesses have been recruiting executives from more traditional businesses and asking their founders to surrender day-to-day management responsibilities.
But these new executives are more cautious than people from within the Internet community, Mr. Spiedel said, demanding more cash compensation with the risky stock options.
"The tight labor market right now has really changed the way people are recruiting individuals out there, and it has also changed how individuals are looking for jobs," said Craig Kams, a senior consultant with PriceWaterhouseCoopers.
This year, CEOs at the Internet companies surveyed will earn base salaries 15.3 percent higher than last year and cash bonuses that are 31.3 percent larger.
The average total direct compensation for the CEOs soared from about $1.7 million last year to about $4.8 million this year, a sign of the run-up in the values of Internet companies in late 1999 and early 2000, Mr. Spiedel said. The average has been tempered since then as falling stock prices have diminished the worth of options.
Chief operating officers will earn bonuses 85 percent higher than last year as more Internet companies add that position and have been forced to pay sign-on bonuses to compete.

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