International -- Latin America: Executive Pay
Latin Execs Light Out for Dot-Com Land (int'l edition)
Defections are driving up salaries at Old Economy companies
In Latin America, as in much of the world, the siren call of the dot-coms is hard to resist. Just ask Luis Mario Bilenky. The 44-year-old Brazilian, whose resume includes stints as director of marketing for McDonald Corp.'s Latin American operations and chief executive of Blockbuster Video in Brazil, took a job with StarMedia Network Inc., a New York-based Spanish- and Portuguese-language Internet portal, in January. For Bilenky, the decision to trade in his brick-and-mortar career for a virtual one was not difficult. "Whether you like it or not, the Web is changing the world," he says. "I could be a spectator, or I could be part of it."
From Sao Paulo to Mexico City, seasoned business executives are defecting from well-established companies to Internet startups, where salaries may not be as high but where there is often the promise of an initial public offering windfall or a lucrative buyout down the road. "A lot of people are willing to take a chance for that pot of gold at the end of the rainbow," says David E. Ivy II, a senior partner at Korn/Ferry International's office in Sao Paulo. "In my 28 years in Brazil, I've never seen as many opportunities for executives," he says.SPILLOVER EFFECT. For those Latin American executives who choose to stay out of the Internet race, the dot-com boom is having a beneficial spillover effect. The scramble for executive talent to staff the Net startups of Brazil, Argentina, Mexico, and elsewhere is helping drive up salaries and perks for execs as a whole, as companies fight harder to hang on to their most valued employees.
Already, compensation for high-level executives in some Latin American countries is on par with or above those in European countries. According to a recently published survey by Korn/Ferry International, demand for senior executives jumped 30% in Latin America in 1999 compared with the previous year. That topped increases in Asia (24%), North America (17%), and Europe (8%), and is all the more impressive considering that much of Latin America was in recession last year. "No question: There is a shortage of qualified personnel in Latin America," says James E. Boone, Korn/Ferry's president for the Americas.
Executives with the right skills are fetching top dollar. A CEO in Argentina earned slightly above $800,000 last year, a figure that includes base pay as well as bonuses and perks, such as cars and sports-club memberships, according to Towers Perrin, a New York consultancy that polled companies with annual sales of around $500 million in 24 countries. That's almost double what a CEO in Spain makes, though still below the $1.3 million average for American CEOs. In Mexico and Venezuela, total CEO compensation hovers at $500,000, comparable to Germany. In Brazil, the average CEO salary fell by close to 30% in dollar terms last year, to $492,565, due to the devaluation of the real. But fret not for the Brazilian CEO: He's still making 49 times what a manufacturing employee takes home. By comparison, that multiple is only 24 in Britain.
Don't expect the competition for CEOs with the right stuff to let up. Latin Internet and technology companies need to add weight to their corporate mastheads in preparation for eventual IPOs. According to John Mestepey, managing director of A.T. Kearney's Miami office, companies planning to list on Nasdaq want executives whose credentials will win over Wall Street. "What that translates into is a senior-level executive who has managed good-size companies in Latin America," says Mestepey. Language ability, ideally both Spanish and Portuguese, and an understanding of the region are a must. "The emphasis is not on whether these executives understand the Internet but on how they have built up successful businesses," he adds.
The battle for top talent is having an impact on the structure of pay packages. Performance-linked bonuses and stock options were once unheard of but are now slowly catching on. In Argentina, these two components make up close to 40% of a CEO's total compensation package, vs. 50% or more for a U.S. CEO. The trend will probably accelerate as more Old Economy companies lose precious talent to New Economy businesses where stock options make up a large chunk of pay. "This is causing old companies to redo their whole compensation packages," says Bilenky. No doubt the prospect of a bundle of StarMedia shares played some role in Bilenky's decision to join the virtual workforce himself.By Cristina Lindblad in New YorkReturn to top