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Asia slow to slip shares into pay packets

HONG KONG: Many a successful Asian entrepreneur adheres to the old Chinese adage that it is better to be the head of a chicken than the tail of an ox.

But heading a chicken - a euphemism for a private and often family-held firm - usually does not mean offering employees the meaty incentive of stock options that have become part of the standard U.S. pay package in the Internet-driven "new economy".

"The problem over here is that the whole idea of giving equity to employees is a pretty new thing. It's all sort of family-oriented," said Harold Mandel, director of Asian executive recruiting firm Bennett Associates, based in Hong Kong.

Some local Internet start-ups' resistance to paying employees in shares has exasperated headhunters, who are competing ever more vigorously to find qualified candidates in a shallow pool.

"Asian companies have a 'control thing'. They don't like giving a lot of the company up," said Terry Philbert, executive director of Executive Asia Ltd, which focuses on finding candidates in Asia for U.S. and European Nasdaq-listed companies.

"They don't seem to understand that in Silicon Valley, people don't give a lot of stock away because they're nice. They do it for a strategic reason," he said.

STEEP LEARNING CURVE

Despite initial resistance, many Asian companies were open to learning about how to lure talent with equity, headhunters said.

"We've been telling Asian family-owned companies that the only assets that really matter to them are people," said Robin Sears, president of Futurestep Asia, from Singapore.

"Investing in bricks and mortar won't get them many employees," said Sears, whose on-line recruiting firm was formed by Korn/Ferry and The Wall Street Journal.

Most headhunters said they were advising their clients to reserve about 10 to 15 percent of their fully diluted share capital for executives and senior management.

The chief executive's stake would vary widely from two to seven percent, with much depending on his or her reputation, business contacts and experience, the level of outside investment and the firm's status with regard to an initial public offering.

Chief financial officers and chief operations officers would take between one to five percent, while chief technology and information officers could command two to six percent.

Salaries for CEOs ranged from US$200,000 to US$500,000, while CFOs, COOs, CTOs and CIOs could expect to make between US$100,000 and US$300,000.

"The cash discount for moving someone from the old economy to the new economy is typically in the order of 25 to 50 percent," said Max Lummis, CEO of Executive Access in Hong Kong.

"But the upside in the options should be several times what you gave up," he said.

QUALITY NOT QUANTITY

By learning from U.S. models and mounting staff attrition rates, Asian start-ups and traditional firms spinning off Internet units are realising the need for quality management.

"To ensure the control of the company is not taken over by venture capitalists or investment banks looking to make a killing on an IPO, it is critical to have people in place who are experienced in high-level business transactions," said David Coates, managing director at York Executive Search in Hong Kong.

Mandel said companies poised to launch IPOs within a 12-month timeline most needed to recruit strong talent. "They're gearing up for the heavy-hitters: the COO, the CFO, the CEO," he said.

"They need someone... who can do a roadshow, so the value is partially internal because it can help the business but also external because it can add credibility to the company."

Headhunters said they had been successful in poaching executives from around Asia, with many moving from the technology units of traditional companies, banks and consulting firms.

"Asia is catching up very quickly in terms of compensation packages," said Mandel. "A good investment banker in Hong Kong is probably taking home quite a similar amount of compensation as one in New York, and this is now happening in technology."-Reuters