Underpaid Founders and Pushing the Founders Out: Two Great Articles

October 11th, 2006

Harvard Business School has a great free newsletter containing executive summaries of articles written for the school’s Alumni Bulletin. Two recent pieces are highly topical for many emerging business.

The first is an article called Are Founders Underpaid? Author Noah Wasserman finds that compensation to founders of private technology companies trails that of non-founding executives by an average of $300,000. The summary identifies a survey pool of 528 companies, but doesn’t go into detail on specific industries or growth stages. Wasserman offers a number of possible explanations for this, including the facts that non-founders can jump ship more easily, and founders may pay non-founders more to give them a greater personal stake in the business.

The second article is even more interesting and covers the thorny question of When Founders Must Go. The article consists of a short case study of Wily Technology and describes the negotiations among the Board, senior management and founder Lew Cirne regarding his role. Author Noah Wasserman summarizes one important component of the founder’s decision making as “[be] Rich vs. [be] King”. In other words, bring in someone who can take the company to the next level, or remain lord of a small domain.

I don’t think the choice is nearly that simple, nor is it an either/or decision, but both pieces make for interesting reading.

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