Survey Finds Executives' Salaries Falling At U.S. Biotechnology Firms

Editor's Note: This article, which discusses the salaries of executives at biotechnology companies, is the second in a two-part series. The first part, which appeared in the April 29, 1991, issue of The Scientist, dealt with the salaries of middle managers and scientific staff at biotech firms. The average total cash compensation for most biotechnology executives fell this year, according to an annual survey by J. Robert Scott, a Boston-based executive search firm specializing in technology, and the Boston-based National High Technology Group of Coopers & Lybrand, an accounting and consulting firm. The study found that in 1991, total average cash compensation was expected to decline from the 1990 figures among five of seven executive job categories--vice presidents of operations/manufacturing, research and development, sales and marketing, and regulatory affairs, plus chief financial officers--mostly because companies held salaries in check as the economy worsened and financing became more difficult to obtain. The only exceptions to the compensation trend were among chief executives and vice presidents of business development, who benefited from larger bonuses in the absence of traditional pay hikes. "Generally, the level of compensation stayed relatively flat, because the revenues are still not there," says J. Robert Scott president William A. Holodnak. In terms of salaries, he says, "the two hottest [job] categories are the people who can raise money--the CEO and the vice president for business development." To prepare the survey, J. Robert Scott queried 1,300 individuals. Of those, 34 percent responded, representing 245 United States biotech companies. Nearly 70 percent of the companies whose officials responded to the survey were involved in therapeutics or diagnostics. Thirty percent were based in California, while New England was home to 18 percent. Thirty-two percent of the companies were backed by venture capital and 37 percent were public companies. Another 30 percent were private companies without venture capital backing. According to the survey, the number of women executives increased by 15.5 percent in all positions between 1990 and 1991, with the only exceptions found among chief executives and the vice presidents of regulatory affairs. For chief executives, total cash compensation rose 12.5 percent, to an average of $176,000, in 1991 over 1990. For vice presidents of business development, the increase was 10 percent, raising compensation to an average of $111,800. The average cash bonus for chief executives was 25 percent of base pay. Vice presidents of business development received bonuses constituting 15 per- cent of base pay, on average. If the economy improves and financing becomes more accessible, Holodnak predicts, "you'll see another jack-up in compensation, certainly at the senior levels." In fact, some believe that increases would be necessary to compensate for the recent decline in salaries in some positions. That would be welcome news to the biotech executives whose average salaries have declined. In particular, some suggest that those likely to receive higher pay will be regulatory affairs personnel, reflecting the increasing number of products that are awaiting regulatory approval before reaching the marketplace. "Regulatory affairs people are in short supply," says Roger Salquist, chairman and chief executive of Calgene Inc. of Davis, Calif. "More companies are maturing with more products." The Scott survey reported that 52 percent of the companies currently without any products expect to introduce a product within the next two years. This also suggests that compensation will soon increase for other executives because more senior-level people will be needed to administer the added departments. But, as one executive points out, the average compensation may already be rising for many senior-level people. The continued emergence of startup companies, which can't afford huge salaries and rely more on stock options, may have pushed down the averages. "We're seeing a lot of new faces," notes James Sherblom, chairman and chief executive of TSI Corp. of Worcester, Mass. "Incumbents haven't seen their salary decreased." In any event, the survey reported that average total cash compensation for vice presidents of operations/manufacturing declined by 12.5 percent, to a total of $103,500. For chief financial officers, the average fell less than 1 percent, to $96,900. For vice presidents of regulatory affairs, the drop was 6.3 percent, to $86,000. Vice presidents of sales and marketing suffered a 5 percent drop in average salary, to $98,500. Vice presidents of R&D experienced a 3 percent drop, to $102,500. Some, however, were quick to note that circumstances vary drastically among companies. Alan Dalby, chairman and chief executive at Cambridge NeuroScience Research Inc. in Massachusetts, says that many firms will pay the head of research more than the CEO, if the individual is exceptionally qualified and needed for product development. "The biotech world we live in," he says, "is evolutionary." Edward R. Silverman is a freelance writer based in Hoboken, N.J.

Survey Finds Executives' Salaries Falling At U.S. Biotechnology Firms

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