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by
Dennis Schroeder
Every January a substantial
number of C-level executives (CEO, CFO, CIO etc.) return to the
workforce in new jobs. Historically, a very high percentage of these
executives seek and accept the most desirable positions with publicly
traded companies. The Center for
Executive Performance is a firm that helps very senior executives
with their job search. Our consultants are now seeing a marked shift
away from these sought after positions in favor of jobs at private
equity funded companies. This shift may be creating a vacuous hole
in leadership talent in the public sector.
There are many reasons for this shift. Dennis Schroeder, President
of the Center for Executive Performance,
stated, “The recent accounting rule change on expensing options
has presented the Compensation Committees of Board of Directors
with many thorny issues. Stock options have been significant long–term
incentive and driver of an executive’s total wealth creation
strategy. As stock options become limited or disappear at public
companies, private firms are gaining a real advantage in attracting
the best and brightest leadership talent.”
Recent
growth in executive employment has been in the mid-cap companies
that are significantly or wholly owned by private equity firms.
And the deals are sweet; The Center
for Executive Performance has seen equity components of the
compensation packages exceed $15 million. “In the last year
we were fortunate to work with several star executives who received
multiple offers from some of the top names in business,” said
Mr. Schroeder. “Each of these executives opted to work for
smaller, lesser recognized companies funded by private equity firms
that offer very lucrative long term equity incentive packages that
could equal $10 million plus.”
That type of competitive compensation resonates with top executives.
“This year over 60% of our clients will join a company funded
by private equity,” Mr. Schroeder predicts. What appeals to
these star executives, besides the significant wealth creation,
is an evident shift in overall strategy. Private investors are driving
for a different set of goals: long-term value creation versus next
quarter’s earnings release. The executive team still has to
perform quarter to quarter, but there is more room to grow and adapt
according to market requirements. The executive really gets the
opportunity to run his or her own show.
So how do C-level executives make the switch? The very best times
for these high-powered executives to be in the job market are the
fall and winter business cycles. “More than 50% of our clients
who take new opportunities this year will do in the first quarter,”
Mr. Schroeder said. “In the first two weeks of this year I
helped several clients negotiate starting packages ranging from
$300,000 to just under $1 million in total cash compensation plus
numerous other perks and long term incentives.”
Regardless of when the search commences, these opportunities cannot
be found overnight. Many executives have been at their search for
a while. “The average length of time for these searches has
been just under six months,” according to Mr. Schroeder, “some
will take three months while others will take nine months. There
is no magic in this process, just plain old-fashioned hard work.”
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