RealTime IT News

Share Remuneration Myth Exposed

[Sydney, AUSTRALIA] The popular perception that Internet companies place strong emphasis on long term incentives such as equity as a means of remunerating employees has been exposed as a myth in the Australian market.

A survey by PricewaterhouseCoopers (PwC) has revealed that e-commerce organizations are just as likely to use short term incentives as long term ones, including similar incentives to those used by 'traditional' businesses such as planned individual bonuses, sales commission, discretionary bonuses and profit sharing.

The e-Commerce Remuneration Survey indicates that 40 percent of e-commerce companies use short term incentives, while 20 percent of respondents use no incentives at all.

The report also shows that salaries of senior employees in e-commerce organizations are similar to those holding equivalent roles in traditional organizations, with the exception of the CFO role.

"Many people assume that e-commerce organizations, and dot-coms in particular, are too cash poor to pay their employees competitive salaries, and therefore place a strong emphasis on equity as remuneration," said PwC's Global Human Resource Services (GHRS) principal consultant Fiona Shakespeare.

"Our survey shows this is clearly not true," she said. "While many believe e-commerce organizations do not have the resources to design, implement and pay short-term cash incentives, our survey clearly indicates otherwise."

However, Ms. Shakespeare warned that e-commerce organizations would need to look carefully at the methods used to reward and motivate key employees given the recent correction in tech stocks on share markets across the world.

"The dramatic fall in performance of tech stocks raises the question of whether these companies are considering compensating employees with cash incentives," Ms. Shakespeare said. "Our survey shows that most are not, preferring instead to offer additional equity, which of course may or may not pay off in the future."

"And if these companies start to change their focus from innovation and product development to improving financial performance, they will also need to structure more competitive packages for senior financial executives to attract and retain the right level of expertise," she said.

The PricewaterhouseCoopers e-Commerce Remuneration Survey is the first of several surveys conducted on Human Resource practices in Australian e-commerce organizations. The data was collected between August and October 2000 via an online questionnaire, and analyzed by statistical and remuneration specialists within PwC's Global Human Resource Solutions (GHRS) consulting practice.

Responses were received from 35 organizations, the large majority of which were Australian-based dot-coms. Results were compared with published benchmark data on traditional organizations from varied industries and data on e-commerce organizations in the U.S. and U.K.