Nadia Haddad· Director of Rewards, MEA, Qasr Holdings
Posted in Executive Compensation ·
Listed biotech in the US, roughly 450 people, one approved product and two in late-stage trials. Until last year executives received 60% options and 40% time-vested restricted stock. Under pressure from the proxy advisers and two large holders we moved to 50% PSUs on pipeline milestones and relative TSR, 25% options, 25% restricted stock.
A year in, the PSU milestones are already awkward. One trial readout slipped by two quarters for reasons outside management's control and the committee is being asked to adjust.
My view is that for a company whose value depends on binary events, options were the honest instrument. Interested in whether others in life sciences or early-stage technology see it the same way.
0 reactions · 5 replies · 6 views
James OkaforCRP, CEP
VP, Total Rewards, Halcyon Financial Group
Agree. Options pay only if the share price goes up after grant, which in a development-stage company is as clean a performance test as you can get. We have kept 70% options and say so in the proxy in exactly those terms. Our vote was 88% last year.
Priya RaghunathanGRS, CSI
Head of People Analytics, Calibre Software
I see it differently. Options in biotech reward volatility as much as progress. We granted at $11 in a sector trough, the whole sector recovered, and executives had large gains with a pipeline that had not moved. PSUs on milestones at least require something to have happened.
Dana WhitfieldCRP, GRS
Director, Global Compensation, Meridian Health Systems
Dana WhitfieldCRP, GRS
Director, Global Compensation, Meridian Health Systems
How large is your market cap? The answer changes with size. Below about $2bn our holders are specialist funds who are relaxed about options. Above that the generalist and passive holders arrive, and their voting policies treat options as not performance-based at all.
Priya RaghunathanGRS, CSI
Head of People Analytics, Calibre Software
One more consideration: burn rate. Options use far more shares for the same grant value. Moving to full-value awards cut our annual share usage from 4.1% to 2.6% of shares outstanding, which mattered when we went back for a new share pool.
