Pharma Management
Stocks Vs. Options By Company Size
annually at double-digit rates.
The drive behind increased stock awards seems obvious.
Over the last decade, candidates have found themselves holding options that inevitably had little or no value after years of
service to a company. This is not surprising given the highrisk nature of an industry challenged with difficult scientific
hurdles, ever-strengthening regulatory barriers, and issues of
broad global market access. Many companies fail, and many
therapies do not make it to market. With this sobering view of
the market and the odds of success less certain, executives are
unwilling to put such a large percentage of their compensation
into traditional option awards which — based on recent exits
— are less likely to realize the payoffs seen in years past. Until
the industry can reinvigorate pipelines and opportunities for
significant growth with healthier returns, this trend is certain
to continue.
craft their equity offering. The executive search industry is
seeing firsthand that a candidate's deciding factor is often the
percentages of stock options vs. stock awards in the equity.
Prospective candidates are well aware of the market trend, so
stock awards have become expected, not just a negotiation
strategy.
To remain relevant within the marketplace, biotechnology
and pharmaceutical companies will have to remain more cognizant of these trends. Executives and investors will have to
evaluate how their own compensation plans may be affecting
their ability to attract top talent and then adjust their ongoing
strategies accordingly.
About the Author
Steve Cornacchia specializes in the life sciences practice at executive search firm ON Search Partners. He
has over a decade of international search experience
consulting to multinational biotechnology, medical
device, and pharmaceutical companies, including
some of the world's foremost companies like Teva
Pharmaceuticals, Allergen, and Shire.
CRAFTING OFFERS TO COMPETE
Base compensation is certainly the foundation of a compelling
offer to a candidate for an executive position, but companies
can provide some strong lures by paying attention to how they
July 2013
LifeScienceLeader.com
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