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Web-based Cos. Pay Execs More Cash

August 22, 2000

NEW YORK (AP) _ Internet companies still use stock options to woo executives, but they are increasingly compensating officers the Old Economy way: with cash salaries and bonuses.

Web-based businesses are paying out 13 percent more in cash than last year to top management, reflecting a tight job market and an increased focus by Internet firms to move toward profitability, a PricewaterhouseCoopers study says.

At the same time, Internet companies are awarding executives just 1 percent more in stock options than the year before, the accounting firm said.

``The dot-coms of the world have gotten some discipline,″ said Edward J. Spiedel, a director at PricewaterhouseCooper’s Unifi Network, which authored the study of pay practices at 123 Internet firms.

The cash portion of pay packages now often includes short-term incentives tied to company performance, like increased revenue and movement toward the break-even mark.

To do that, many Internet businesses have been recruiting experienced executives from more traditional businesses and asking their founders to surrender day-to-day management responsibilities.

But these newly recruited executives are more cautious than people from within the Internet community, Spiedel said, demanding more cash compensation along with the risky stock options.

``The tight labor market right now has really changed the way people are recruiting individuals out there and it has also changed howindividuals are looking for jobs″ and what they expect to earn, said Craig Kams, a senior consultant with PriceWaterhouse.

This year, CEOs at the Internet companies surveyed by PriceWaterhouse will earn base salaries that are 15.3 percent higher than last year and cash bonuses that are 31.3 percent larger.

Chief operating officers will earn bonuses 85 percent higher than last year, as more Internet companies add the position and have been forced to pay sign-on bonuses to compete.

The average total direct compensation for CEOs at the firms surveyed soared from about $1.7 million last year to about $4.8 million this year, a sign of the substantial increase in the values of Internet companies late last year and early this year, Speidel said.

But the value of compensation packages has been tempered since then as falling stock prices have diminished the worth of options granted to executives, he said.

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