Competing With Silicon Valley for Talent Is Becoming Insanely Expensive

Photographer: Michael Biann

Silicon Valley has a frequency of high-profile executive defections. Close

Silicon Valley has a frequency of high-profile executive defections.

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Photographer: Michael Biann

Silicon Valley has a frequency of high-profile executive defections.

Silicon Valley's rising tide may not lift all boats. As other cities around the world try to develop their own tech hubs, most companies outside the Valley will find it difficult to snare top talent with their executive pay packages.

Here's what Beijing, London, Tel Aviv and Tokyo are up against: 22 tech execs in the U.S. each made more than $20 million in total compensation, according to 2013 proxy data compiled by Equilar, a research firm. The numbers include salary, bonus, stock and other payouts.

The frequency of high-profile executive defections to the Valley — through either recruitment or acquisition — is much higher than those going somewhere outside. For every Hugo Barra leaving Google for China's Xiaomi, there's Sanjay Poonen jumping from Germany's SAP to VMware, London-based DeepMind getting bought by Google, and Israel's PrimeSense going to Apple. The Valley's enormous pay packages should drive up prices for top talent across the industry, said Aaron Boyd, director of governance research at Equilar.

"The success puts pressure on high-profile positions to be more competitively paid," Boyd said in an interview. "Because companies want to retain and compete, the pay levels have gone up."

Tech companies outside the U.S. have always struggled to attract the industry's top talent, which tends to congregate in California where the jobs are. But the Valley's gravitational pull is only getting stronger. The 22 execs making more than $20 million, according to 2013 proxies, compares with just four in 2007. That raises the financial barrier ever higher.

"It's a competitive market," Tim Sparks, president of San Jose, California-based consultancy Compensia, said in an interview. "It's amazing what companies will do to go after people."

Charles Herman, a managing partner for information-technology recruitment at the Lucas Group in Chicago, said companies are offering more equity to complement cash salaries and bonuses, and increase total compensation. They're also enticing potential recruits with less tangible incentives such as promises of a work-life balance and flexibility on relocation, he said. Executives who don't want to move their families immediately for a new job can sometimes work remotely or fly back and forth on the weekends — with the employer footing the bill.

That's not the most practical solution for a company in, say, Finland. A flight there from America's West Coast takes about 16 hours. Then again, it worked for Stephen Elop for the three years he ran Nokia.

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