High-Tech Execs Chase The Dot-Com Dream

hen trying to lure top executives, Internet start-ups have made it a dot-common practice to offer fat stock options, the promise of an initial public offering around the corner and a flashy dream of new-economy riches.

"I don't think compensation is a tremendous science to these people, and by that I don't mean to knock them," said Steve Hall, a compensation expert at Pearl Meyer & Partners Inc., New York.

"They are throwing salaries, bonuses and options out [on the table] and just saying, 'This is what we've got to do,' " Hall said.

Big stock grants and options, market growth and what some consider controlled risks,if they fail at one dot-com, they can move on to the next,have high-tech execs moving to new companies like settlers moved to California during the Gold Rush.

Web integrator Lante Corp. is one example of an Internet-related company doing what it has to do. The Chicago-based Internet services company, which went public Feb. 11 at $44 per share and closed at $54.94 that day, had a market cap of $924- million on May 4,a level that once took companies years to reach.

	Big Pay For New Companies
	Executive Name	Title	Company	1999 Cash Pay
	A. Clayton Perfall	Director/CFO	Circle.com	$2.5M
	Robert DeSantis	VP, network commerce	Ariba	$617,594
	Mark Tebbe	Chairman	Lante	$576,000
	Nelson Carbonell	Chairman/Pres./CEO	Cysive	$511,926
	Kevin Rowe	Pres., N. America	Agency.com	$490,624
	Bruce Parker	Exec. VP	Sapient	$462,000
	Nancy Faigen	Pres. sales and service delivery	Digex	$450,000
	U. Bertam Ellis	Chairman/CEO	iXL Enterprises	$450,000
	J. Brian Farrar	Exec. VP/COO	Xpedior	$425,433
	Robert Gett	President/CEO	Viant	$419,230
	Timothy Andrews	VP/CTO	Viant	$417,542
	Christopher Harding	VP, strategic growth and marketing	Breakaway Solutions	$384,715
	Larry Tanning	Chairman/Pres./CEO	Tanning Technology	$380,792
	C. Rudy Puryear	President/CEO	Lante	$376,894
	William Nussey	CEO/President	iXL Enterprises	$375,000
	Source: Company proxy statements

And even after the stock dropped in the weeks following its IPO, closing at $24.75 on May 4, Tebbe's stock holdings still are worth more than $320 million.

Lante President and Chief Executive Rudy Puryear, whose salary last year was $376,894, including a $125,000 bonus, owns 2.4 million shares of company stock. However, stock is just one key factor in recruiting talent for a newer company, he said.

"I would argue that the upside that the individual gets on their stock is only one of the factors that is attracting the people here," Puryear said.

But Lante is far from the only company using the carrot-and-stock approach. A recent compensation survey by PricewaterhouseCoopers found that chief executives at Internet businesses on average have a 12.1 percent equity stake in their companies.

"Using stock to attract, retain, and generously compensate many senior-level managers, as well as employees and directors, is not atypical for start-up companies," said Edward Speidel, a director in the Total Rewards practice at PricewaterhouseCoopers, New York. "But Internet companies are using this tactic more aggressively than most," he said.

The compensation philosophy pushed by Internet companies will have repercussions throughout corporate America, Speidel said. "Non-dot-com companies are creating e-commerce subsidiaries, but they will have a difficult time attracting top talent unless these traditional companies have an exit strategy, such as an initial public offering, that can potentially enrich the breakaway company's senior management," Speidel said.

But these executives' sizable stock options do not preclude significant cash earnings. Baltimore-based Web solutions provider Circle.com last year paid its Director and Chief Financial Officer Clayton Perfall $2.5 million in cash pay, which included $300,000 in base pay and a bonus of $2.2 million, up from $50,000 the previous year. As for other new-company executives, William Kurtz, president and treasurer of Scient Corp., earned $209,135 in cash compensation in 1999 and received stock options that would be worth $10.8 million if Scient's stock price gains between 5 percent and 10 percent in value during the years in which it vests. Kurtz's portfolio of stock in Scient is valued at more than $50 million.

Sapient Corp., while in business since 1991, went public in 1996. Its executive vice president, Bruce Parker, was paid $462,000 last year. Parker also earned stock options that could be worth more than $18 million if his company's stock price grows between 5 percent and 10 percent per year between now and when it vests. Parker's net worth, based on his holdings in Sapient, is $2.4 million.

"The numbers you have here right now are beyond the stratosphere," Hall said. But stock options and grants only work if you produce. If you don't produce, they'll come down on you like a ton of bricks."CRN