To hold on to Google's CEO, Sundar Pichai, Alphabet offered him stock worth $199 million, a record equity award for the company.
Google has an advantage in the executive compensation wars: Its stock is coveted. If this were a different industry, say utilities, a prized executive might have to be wooed with cash.
Tech companies use a larger portion of equity to compensate their executives than any other industry. The average tech CEO in the Russell 3000 earns about 70 percent of his or her annual compensation in stock and options awards, according to the most recent Bloomberg Pay Index data. Health care and telecommunications services are close behind.
For some less proven or cash-poor tech companies, equity is more readily available for compensation than cash. For established and still rapidly growing tech companies, stock awards can also be sweeter than cash because of the potential for added financial upside. Offering equity has also become part of the tech industry's ethos of trying to link executive compensation to corporate performance (a calculus that has also, in theory, been prevalent across Corporate America for some time now).
At the other end of the compensation spectrum are more established, legacy enterprises such as utility companies. Those companies need to use salary, bonuses and other non-stock incentives to entice executives (due to the likelihood of relatively weaker stock appreciation around equity grants).
The financial services industry maintains the highest average portion of cash in its executive compensation mix; tech uses much less. Of course, if you're a CEO looking for the biggest payday then you should forget about tech and even Wall Street, as my Bloomberg colleague Brandon Kochkodin has pointed out. Instead, head to the consumer discretionary sector, populated by such companies as Twenty-First Century Fox, Wynn Resorts, and Bed Bath & Beyond -- because that's where the real money is waiting.
This column does not necessarily reflect the opinion of Bloomberg LP and its owners.
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