The document discusses compensation approaches for impact startups. It notes that traditional startup pay models focus on short-term gains for investors through exits like IPOs or acquisitions. This leads compensation to prioritize return timelines and conform to market norms over innovation. Alternatively, "Conscious Compensation" aims to optimize value for all stakeholders over the long run by sharing ownership more broadly through interim liquidity or transaction-independent equity. However, implementing this approach grows more difficult as companies expand due to pressures from various external groups. Therefore, the presentation focuses on applying Conscious Compensation principles to other types of organizations that can still achieve social impact at scale.

1. © Copyright 2013. Compensation Venture Group, Inc. All rights reserved.© Copyright 2013. Compensation Venture Group, Inc. All rights reserved.
Conscious Compensation®:
Paying People at Impact Startups
The Impact HUB
Seattle
30-May-2013
Compensation Venture Group, Inc.
www.compensationventuregroup.com
fred@compensationventuregroup.com

2. © Copyright 2013. Compensation Venture Group, Inc. All rights reserved.© Copyright 2011. Compensation Venture Group, Inc. All rights reserved.
Compensation Venture Group
Equity Interests and
Advisory Roles
Professional Roles
Online Content
Pay and Performance: The Compensation Blog
Conscious Compensation: The Impact Compensation Blog
Effective Equity: The Equity Compensation Blog
Compensation
Consulting
2
Expert
Witness

3. © Copyright 2013. Compensation Venture Group, Inc. All rights reserved.
Passion and Purpose
3
• Find ways to allocate an organization’s financial capital…
• To its human capital…
• Based on creating success for all stakeholder groups…
• Over an extended time period…
• Increasing the economic benefits for all stakeholders…
• To enable the organization to find and engage the right
people to fulfill the mission, purpose, and business
objectives

4. © Copyright 2013. Compensation Venture Group, Inc. All rights reserved.
Pay in Public Companies is All Messed Up
Because of…
• Activists
• Consultants
• Media
• Wall Street
• Government
4
Pay is…
• Short-term Focused
• Complex
• Homogenous
• Compliance-focused
• Targeted by populists
• Increasingly regulated

5. © Copyright 2013. Compensation Venture Group, Inc. All rights reserved.
The Prevailing Performance Measure: TSR
• Stock price growth
Plus
• Dividends
(Reinvested)
5
Why? Exclusive Focus on One Stakeholder Group

6. © Copyright 2013. Compensation Venture Group, Inc. All rights reserved.
To Increase TSR You Can Take Money from Others
6

7. © Copyright 2013. Compensation Venture Group, Inc. All rights reserved.
Or, Optimize Value for All Stakeholders, and Share
7
• This is Conscious Compensation©

8. © Copyright 2013. Compensation Venture Group, Inc. All rights reserved.
Pay at Startups Used to Look Like This
• Base Salary
• Stock Options
• Lean Benefits
8

9. © Copyright 2013. Compensation Venture Group, Inc. All rights reserved.
Realizing Good (or Better) Pay Required a Transaction
• IPO
• Acquisition
• Restructuring
9
But what if you want
to build a sustainable
company and not
liquidate?

10. © Copyright 2013. Compensation Venture Group, Inc. All rights reserved.
Pay at Startups is Homogenous Due to the Financing Cycle
10
Investors
Founders
Board Members

11. © Copyright 2013. Compensation Venture Group, Inc. All rights reserved.
Financing
11
Founders InvestorsBoard
Members

12. © Copyright 2013. Compensation Venture Group, Inc. All rights reserved.
Growing Up
12
Founders Investors
Board
MembersBoards of
Private
Companies
Boards of
Public
Companies
Boards of
Venture
Companies
Boards of
Other
Companies

13. © Copyright 2013. Compensation Venture Group, Inc. All rights reserved.
Now Compensation Discussions Turn To…
13
• Timeline for return to (liquidity for) investors
• Conformity with market norms = less innovation
• Burn rate (dilution) = less sharing of ownership with
employees
• Exit strategy focus = public company norms for pay
• Formalization of pay processes = less discretion
• Risk management = decisions driven by avoiding litigation

14. © Copyright 2013. Compensation Venture Group, Inc. All rights reserved.
Finding a Balance: Capitalism and Social Impact
14
Traditional
Capitalist
Compensation
Conscious
Compensation©
Socially/Politically
Correct
Compensation

15. © Copyright 2013. Compensation Venture Group, Inc. All rights reserved.
Referencing the Model of Conscious Capitalism
 Transcend profit
maximization
 Create
stakeholder
engagement
15
Source: Conscious Capitalism
 Managed for
simultaneous
benefit of
stakeholders
 Create value for
all stakeholders
 Multiple
constituencies
 Profit important,
not sole purpose
 Trust
 Authenticity
 Caring
 Transparency
 Integrity
 Learning
 Empowerment

16. © Copyright 2013. Compensation Venture Group, Inc. All rights reserved.
Very Difficult to Do in Larger Companies
16
Founders
Venture
Investors
Board
Members
Proxy
Advisers
Institutional
Investors
SEC
Media
Peer
Companies

17. © Copyright 2013. Compensation Venture Group, Inc. All rights reserved.
So We’re Focusing on Other Kinds of Companies
17

18. © Copyright 2013. Compensation Venture Group, Inc. All rights reserved.
Who Can Grow into a Larger Social Impact Company
18

19. © Copyright 2013. Compensation Venture Group, Inc. All rights reserved.
It Starts with Some Fundamental Decisions
19
Form of Organization
C
Corp
S
Corp
LLC
Value Sharing
Stay Closely Held=
Compensation +
Dividends
Broad Ownership
with
Interim Liquidity
Broad Ownership
with Transaction-
Contingencies
Equity
Compensation
Alternatives
Partner-
ship
Sole
Proprietor

20. © Copyright 2013. Compensation Venture Group, Inc. All rights reserved.
Then the Decisions Keep Coming, and Getting Harder…
20