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My iMarketsLive (IML) Review. Compensation Plan details with detailed Commission and Pay Plan Structure Breakdown. Detailed overview on how to make money with iMarketsLive (IML) including charts, videos, product info, and company details. 5 Steps to an Effective Sales Compensation Plan You Need to Know Justin Lane — Senior Director of Strategic Services, Xactly Corporation The new year usually signals new sales compensation plans for many companies.
Contact [email protected] for latest 2019 Private Company Board Compensation data. See our latest compensation Forbes article here:
How Much Should You Pay Your Private Company Directors in 2019
In this article we examine recent data that highlights how much you should compensate your board members.
Private companies continue to struggle with the question “How much should we pay our directors?” There are many variables that determine director compensation: number of yearly meetings, industry, business size, business structure and more. The challenge private companies’ face is that there are few data points against which private companies can benchmark their Board compensation plans.
Lodestone Global recently published their 6th Annual 2016 Private Company Board Compensation Survey. The survey included 331 companies across 33 different industries and 39 countries to analyze current board practices and compensation around the world. All the respondents were members of the Young Presidents’ Organization (YPO), an international group of Presidents and CEOs. The organization unites approximately 24,000 business leaders in more than 130 countries. The 331 respondents were all CEOs of companies ranging from $10m to over $1bn in revenues.
2016 Compensation Survey Highlights
![Compensation plan for directors Compensation plan for directors](/uploads/1/2/5/7/125796536/675144862.jpg)
- Median total compensation was $36,000, with Transportation and Logistics leading all industries. Total compensation was ~6% higher than the $34,000 reported last year. This 6% increase (8% in 2015) is the result of increases both domestically (+9%) and internationally (+1%)
- Median Annual Retainer for U.S. based directors was $24,000 vs. $25,000 internationally. This was offset by median per meeting fees for U.S. based directors of $2,500 vs. $2,000 internationally. This is the first time in the survey’s history where domestic and international compensation levels were equivalent
- Nearly 50% of the participants categorized their boards as “Indispensable” or “Very Effective” at driving corporate strategy. These results support the notion that a board, particularly with the right directors, can be essential to achieving corporate goals and improving profitability
- 57% of the companies in the survey had women as board members, up from 55% last year
![Plan Plan](/uploads/1/2/5/7/125796536/543595192.png)
Of note, 50% of the survey respondents were family owned companies. The high participation rate of family majority owned respondents highlights the importance of professional corporate governance to family companies. The median number of board members was 6, with 3 independent directors. This has not changed over the six years the survey has been running. A significantly larger board leads to inefficiencies, while a smaller board risks limiting diversity of perspective so essential to driving effective strategy.
Interestingly, 85% of respondents say board compensation is not linked to performance, roughly in-line with 2015. Without the pressure of public scrutiny, private companies seem immune to this trend.
Historical Compensation Data
*Note: All figures in $USD unless indicated otherwise
*Data represents the median results. Total compensation assumes 4 in-person and 2 teleconference meetings.
Median Annual Retainer By Revenue
*Note: All figures in $USD unless indicated otherwise
Median Per Meeting Fees By Revenue
*Note: All figures in $USD unless indicated otherwise
One would expect total compensation to rise in line with company revenue size. For the past five years our data set has generally shown this trend. We believe the one outlier in the 2016 data, the $0-10m category, can be explained by a number of financial services companies that tended to pay directors more than peers (this happened in 2015 as well). Our sample included a higher percentage of P/E or V/C backed companies at 13% vs. 7% in 2015.
Historically, a statistically insignificant number of companies in the survey have used equity to compensate their board members. In 2016, however, the number of companies that used equity retainers more than doubled to 21% (meeting fees were still nearly all cash). We believe this is due to the increased number of PE/VC-backed companies mentioned above that pay their directors purely in equity or with cash and equity above market rates. These companies are investing in great governance early, to propel substantial growth. We continue to hold the thesis that mature private companies do not use equity as a key element of their board compensation programs.
If you have additional questions on Compensation or Governance issues – please comment below!
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Tune in to our next article that explores how to pick the perfect board member.
Lodestone Globalis a specialized consulting firm providing strategic guidance to chief executives of private and family controlled enterprises, who are considering forming or refreshing a board of directors. Lodestone Global also offers custom tailored board compensation analysis. How can you prepare your company to scale? An excellent product and the right initial talent is key. But when those are in place, here’s a novel idea—how about designing a compensation strategy that empowers and motivates everybody in your business to help the company grow?The structure I’m about to describe has been instrumental in helping my own company, Fishbowl, achieve rapid growth of 70% per year since 2007 with less than a 10% per year addition of staff, even through difficult economic times.
Here’s how it works: every member of the company (and I do mean everyone--from development to marketing; from finance to customer support; from administration to sales) receives compensation that is configured as a base plus commission. And the commission is paid every month.
Consider the advantages of this compensation plan:
- Every employee is inherently motivated to help the company focus on creating revenue.
- Job security increases, as the company’s greatest cost—payroll—rises and falls automatically along with the incoming cash.
- In a company that can’t offer stock options, this is a structure that acts like a stock dividend, motivating teams to pull together and to pull harder as they think of the company’s good. The commission is paid every month, and it can continue to be paid even after you have a stock program in place.
- It closes the inherent gaps between departments by ensuring everyone is focused on revenue, profit and savings, versus individual department agendas.
The commission structure encourages transparency and team participation, as well. Everyone knows what the budget for the monthly operational “nut” needs to be. Each day, everyone receives a report on how the company has progressed towards our monthly “nut.” Beyond that sum, two-thirds of additional revenue goes to the commission pools for each department to share among members. One-third goes to the company.
In a structure like this, the team is highly engaged; with compensation decisions acting like the invisible “belt” that holds every decision in check. Every team decides together how to distribute their portion of each month’s profits. Do we need another programmer to meet a critical goal? As the developers look at the discretionary fund they’ll divide, they are able to decide if the time is right for an additional programmer to help them drive new features for more profit, or if they are able to “crunch it up” a little to keep those funds for themselves and accomplish the work on their own.
Towards the end of every month, we see individuals from every department offering extra resources and help. A developer or member of a support team may go to the sales department, for example, to say, “I have an extra half hour. Is there anything I can do to help you make a sale?”
Are there any disadvantages to this structure? Yes, perhaps just a few:
- The commission plan is different for every role and for every department. For example, there are seven levels of commission that apply to the support and training department. We’re perpetually improving our ability to adjust and adapt.
- Is payroll difficult? In theory, it could be—but in practice, as long as we ensure the commission amounts are accurate, each department can submit the list of amounts to the payroll software and our automated payroll system takes care of the rest.
- Are there legal technicalities? Yes. It does require support from HR to build a program to ensure it is compliant with overtime pay requirements under the FLSA.
- The structure of commission is so foreign to many employees that we’ve actually missed some prospective hires because of it. There are some individuals who are simply unable to adapt to the prospect of compensation that may potentially vary by as much as 50% every month.
In hindsight, however, the potential hires we lost were hires I now realize we wouldn’t have wanted to have. The individuals we’ve gained are entrepreneurial in their focus and are highly motivated to influence the additional upside they’ll receive. After a short while on this program, we find our employees would be highly resistant to going away from this plan.
Interestingly, our structure has made it easier for potential stars to determine and to control their rising wages. We seldom need to change or raise a base salary. Individuals who are ready for an increase are ready to build, sell, train and support on more and better products and services. The rise in income is something our team members can largely influence and control on their own.
In our case, our initial investor was a single individual, making it much easier for us to innovate this format than if we’d been controlled by a traditional board or by the structure of a VC fund (yet another criteria to consider along with the points Forbes Contributor Eric Jackson listed in his top ten reasons VC-based companies fail).
We were unable to offer stock options prior to our company buyback in December 2011. We were so motivated to uncollateralize the stock that the entire company rallied and we paid back the loan seven years early.
It is valuable to note that imprudent use of company stock in startup companies is one of a young company’s biggest risks, as Forbes Contributor Alan E. Hall notes in one of his recent Grow America blog posts.
Even as my company enacts our stock option plan over the coming months, our base-plus-commission plan will remain. As we consider the ways we can continue to achieve 70%-plus annual revenue growth for just a 10-20% increase in staff (or less), we wouldn’t have it any other way. I strongly believe this structure could be beneficial for any company that is looking for an effective compensation strategy that allows them to scale.
Additional reporting for this article was provided by Mary Michelle Scott, Fishbowl president.
'>How can you prepare your company to scale? An excellent product and the right initial talent is key. But when those are in place, here’s a novel idea—how about designing a compensation strategy that empowers and motivates everybody in your business to help the company grow?
The structure I’m about to describe has been instrumental in helping my own company, Fishbowl, achieve rapid growth of 70% per year since 2007 with less than a 10% per year addition of staff, even through difficult economic times.
Here’s how it works: every member of the company (and I do mean everyone--from development to marketing; from finance to customer support; from administration to sales) receives compensation that is configured as a base plus commission. And the commission is paid every month.
Consider the advantages of this compensation plan:
- Every employee is inherently motivated to help the company focus on creating revenue.
- Job security increases, as the company’s greatest cost—payroll—rises and falls automatically along with the incoming cash.
- In a company that can’t offer stock options, this is a structure that acts like a stock dividend, motivating teams to pull together and to pull harder as they think of the company’s good. The commission is paid every month, and it can continue to be paid even after you have a stock program in place.
- It closes the inherent gaps between departments by ensuring everyone is focused on revenue, profit and savings, versus individual department agendas.
The commission structure encourages transparency and team participation, as well. Everyone knows what the budget for the monthly operational “nut” needs to be. Each day, everyone receives a report on how the company has progressed towards our monthly “nut.” Beyond that sum, two-thirds of additional revenue goes to the commission pools for each department to share among members. One-third goes to the company.
In a structure like this, the team is highly engaged; with compensation decisions acting like the invisible “belt” that holds every decision in check. Every team decides together how to distribute their portion of each month’s profits. Do we need another programmer to meet a critical goal? As the developers look at the discretionary fund they’ll divide, they are able to decide if the time is right for an additional programmer to help them drive new features for more profit, or if they are able to “crunch it up” a little to keep those funds for themselves and accomplish the work on their own.
Towards the end of every month, we see individuals from every department offering extra resources and help. A developer or member of a support team may go to the sales department, for example, to say, “I have an extra half hour. Is there anything I can do to help you make a sale?”
Are there any disadvantages to this structure? Yes, perhaps just a few:
- The commission plan is different for every role and for every department. For example, there are seven levels of commission that apply to the support and training department. We’re perpetually improving our ability to adjust and adapt.
- Is payroll difficult? In theory, it could be—but in practice, as long as we ensure the commission amounts are accurate, each department can submit the list of amounts to the payroll software and our automated payroll system takes care of the rest.
- Are there legal technicalities? Yes. It does require support from HR to build a program to ensure it is compliant with overtime pay requirements under the FLSA.
- The structure of commission is so foreign to many employees that we’ve actually missed some prospective hires because of it. There are some individuals who are simply unable to adapt to the prospect of compensation that may potentially vary by as much as 50% every month.
In hindsight, however, the potential hires we lost were hires I now realize we wouldn’t have wanted to have. The individuals we’ve gained are entrepreneurial in their focus and are highly motivated to influence the additional upside they’ll receive. After a short while on this program, we find our employees would be highly resistant to going away from this plan.
Interestingly, our structure has made it easier for potential stars to determine and to control their rising wages. We seldom need to change or raise a base salary. Individuals who are ready for an increase are ready to build, sell, train and support on more and better products and services. The rise in income is something our team members can largely influence and control on their own.
In our case, our initial investor was a single individual, making it much easier for us to innovate this format than if we’d been controlled by a traditional board or by the structure of a VC fund (yet another criteria to consider along with the points Forbes Contributor Eric Jackson listed in his top ten reasons VC-based companies fail).
We were unable to offer stock options prior to our company buyback in December 2011. We were so motivated to uncollateralize the stock that the entire company rallied and we paid back the loan seven years early.
It is valuable to note that imprudent use of company stock in startup companies is one of a young company’s biggest risks, as Forbes Contributor Alan E. Hall notes in one of his recent Grow America blog posts.
Even as my company enacts our stock option plan over the coming months, our base-plus-commission plan will remain. As we consider the ways we can continue to achieve 70%-plus annual revenue growth for just a 10-20% increase in staff (or less), we wouldn’t have it any other way. I strongly believe this structure could be beneficial for any company that is looking for an effective compensation strategy that allows them to scale.
Additional reporting for this article was provided by Mary Michelle Scott, Fishbowl president.