It’s the Equity, Stupid: Compensation Package Focus at BIO 2016 Moves Beyond Cash

June 7, 2016
By Michael Krieger, BioSpace.com Breaking News Staff

In today’s hyper-competitive biotech job market to attract and retain talent it seems appropriate that the first session at this year’s BIO 2016 conference in San Francisco was focused on comp plans.

The session, titled “Driving Organizational Success Through People: Determining the Appropriate Compensation Package” was moderated by Ken Wechsler, associate partner at compensation research firm Radford, and included a team of biotech HR professionals, retained search professionals and industry experts who discussed the latest issues facing biotech HR teams and hiring firms today.

Compensation strategy differs based on a company’s size and maturity level, according to Steve Hochberg with retained search firm Caliber Associates. Hochberg sees a field with more competition for talent in market where half of the companies he deals with looking to grow by 10% or more this year.

One thing panelists agreed on was the importance of equity in virtually every comp plan, even if it takes several forms. Although many executives are still attracted to traditional stock options, rank-and-file hires are being lured with restricted stock units (RSUs), which unlike options are grants of stock that don’t need to be purchased, but are worth the full value of the stock when vested.

Rob Surdel, partner at Radford, added that that options are often preferred for earlier hires when there is more high growth opportunity, where RSUs are more desirable in stable company situations. Surdel suggested that candidates must evaluate not only what equity is worth now, but what it will be worth down the road.

One challenge for hiring firms is keeping the pool of options or RSUs available for new hires. As options are consumed, HR and the executive team often need to gain shareholder approval to “evergreen” the options pool year over year, and Radford’s Wechsler drove home the importance of keeping this eventual need in mind as private companies plan for an IPO or acquisition.

In the end, it's not the number of shares or options, it's the bottom line. “Value-based compensation is about increasing the amount of shares year over year if the stock price declines, offering a consistent dollar value each year,” said Pat Leckman of Illumina .

Hot Hires
When Wechsler asked what topics were trending for HR and hiring teams, the panel quickly rattled off a number of roles. Top of the list was clinical development, especially at the MD level, followed by regulatory affairs practitioners, pricing and reimbursement specialists, merger and acquisition project and alliance managers, big data specialists, and quality teams.

Changing Philosophy
Although company size can make big differences in hiring strategies, some things hold true for all. Kenneth Boehm, vice president of HR for Aimmune Therapeutics , a 65-person company working on food allergy vaccines, said that they target the 50th percentile for base plus bonus, a sentiment echoed by other panelists including BioMarin ’s Amy Wireman, who added that you “have to pay what it takes” to make the right hire and that targets for compensation should be viewed as guideposts, not gospel. Added Aimmune’s Boehm, “We give options to everybody. Base and bonus are NOT why people come here.”

Another challenge is separating fact from fiction. “There’s lots of anecdotal data out there,” said Boehm. “Every candidate has a friend who got a 30 percent bump by changing jobs, but that is opinion, not reality. We are not going to make up for all the potential upside a candidate leaves at their old firm.”

Compensation Priorities
Comp strategies must go beyond hiring. BioMarin’s Wireman stated the need is to not just attract, but to retain, engage and develop talent. Hiring a superstar may be for naught if other team members become disgruntled that a new employee is offered substantially more than their current packages. Thus, it is important to constantly evaluate the internal comp plans as well as those for new hires to ensure some level of parity, as word of a key hire with a bigger comp plan will spread quickly through a department regardless of admonitions to not discuss compensation plans with peers.

In addition, as biotechs hire for projects that may run beyond the traditional four-year stock option vesting period, care must be given to ensure key hires stick around, by either extending the vesting period or turning to annual grants to keep employees happily engaged.

All panelists agreed to one major takeaway: HR must communicate the value proposition to candidates and employees by delivering competitive compensation packages and continuing to monitor services, facilities and work environments to increase acceptance and decrease turnover.

“We need to give employees the experience they expect,” said Aimmune’s Boehm. “Candidates can match the compensation you offer anywhere, we need to offer more about the mission than the money.”