Technology Compensation After the AI Boom: Why One Strategy No Longer Fits All

Jake: In this season of Pearl Meyer Unscripted, we're looking at executive compensation through an industry lens. Our co-hosts, Mark Rosen and Aalap Shah, are joined by several colleagues who specialize in different industries, including technology, healthcare, oil and gas, and more, to examine the aspects of compensation design that are unique to each.

We continue our technology discussions with a closer look at how AI, delayed IPOs, changing valuations, and evolving private markets are reshaping compensation and equity strategy.

Mark and Aalap are joined by managing director Will Cockle, who is based in San Francisco and advises technology companies on executive compensation, equity strategy, and corporate governance across the company lifecycle, from venture-backed startups preparing for an IPO to established public companies. 

Together, they discuss why tech companies are no longer operating in a single compensation market, how boards should think differently about AI-native versus traditional SaaS companies, and why compensation strategy increasingly needs to be treated less like a benchmarking exercise and more like a capital allocation decision. Let's listen in.

Mark: Hey, Will. Thanks for coming and being on our podcast today. Aalap and I are really excited to talk about some things going on in the tech space.

Will: Yeah, excited to be here. Thanks for having me, Mark.

Aalap: Yeah, Will, really appreciate you taking the time. If you don't mind, I'll just kind of jump into something that's quite top of mind for many of my tech clients, which is, how are compensation dynamics differing between AI-focused companies and more traditional SaaS companies?

Will: Great, great question, Aalap. You know, what we're seeing is two very different markets, as you outlined. The AI-focused and AI-native companies are competing for very different talent and facing different challenges than the traditional SaaS market.

For example, on the AI topic, boards are starting to ask not just, "How do we compete?" but, "Which talent market are we competing within?" I wrote a recent article on this where AI talent really isn't just one market. We've seen it be grouped into three broader markets. It's the frontier AI creators—those large language models—it's the AI product builders, and then the AI-enabled operators. And those companies have very different talent strategies.

For example, Frontier AI, or those AI-native companies, the board conversation is really about attracting that scarce talent, balancing the premium pay with internal equity, and deciding whether the extraordinary AI compensation should remain exceptional or become part of that long-term pay model.

On the SaaS topic, for traditional SaaS companies, the board conversation is very different. It's about rebuilding the confidence in equity, managing dilution, retaining those high performers and keeping them engaged and focused, and evaluating whether one-time actions are necessary at this point in the company's lifecycle—things like potential repricing of options, one-time retention awards, or exceptional grants to that key talent to make sure that they are retained and engaged as the company weathers this market volatility.

Aalap: Yeah, I think you make a great point there in some of those strategies, because I think what the SaaS companies are really struggling with right now is how to make their equity story compelling again. Whereas the AI companies are not necessarily having to tell that story, but they have to really tell the story of what that promise of that equity value could be and when and how soon it'll get delivered. You gave some great counsel on the SaaS side. Any specific counsel for the AI companies?

Will: For the AI companies, it's number one, determining where they want to compete. Are they going after those 10x employees, those engineers that are going to truly transform the company? And in that case, you know, it may make sense to have these exceptional pay programs.

A trend that we're seeing, even with those top-of-market programs, is moving away from strictly time-based guarantees to really focusing on outcomes and performance-based awards.

Mark: So, Will, how do you think the boards should think about this? What questions should they be asking?

Will: Boards are starting to ask, "How are we supposed to measure this investment in exceptional talent?" Is it product milestones? Is it customer adoption, revenue growth? Starting to put in place some kind of performance measures that are going to ensure that those exceptional hires are being rewarded for the actual outcomes.

Aalap: Will, I think the point that you're making on performance accountability is really a strong one because what's definitely happening in this marketplace—and it's something that we've seen in different cycles—is a significant thirst for talent and a willingness to throw a lot of dollars that way, but very little performance accountability.

So, are you suggesting this performance accountability should be for all hires, or are we really talking about only the executive hires? Or, you know, would you include the engineering hires as well?

Will: So, I mean, ideally it applies to the whole company. You know, we're seeing focus on efficiency, productivity, profitability, particularly as the capital expenditures are increasing, regardless of what type of company it is. But the way that boards think about the performance is different depending on the type of employee or the function, for example.

It could be limiting the equity participation to your high performers and really focusing awards on those that are performing well and that are critical to the future of the company, versus spreading it widely across the organization, which was more of the traditional approach, you know, four or five years ago.

From an executive perspective, having more at-risk compensation aligned with the metrics that are important for the company. We're seeing, particularly at the pre-IPO level among some of the SaaS companies that may be doing some more transformation-type work at the company, having broader performance-based equity across the executive team that typically, in the past, was reserved for founder CEOs or kind of limited until that company was public. So, there's more focus on holding the executive team accountable for the performance of the company, not just the value of the equity.

Mark: Hey, Will, I come from a little bit more conservative bent, and I think a lot of directors are uncomfortable with some of the differentiation between folks within, you know, the internal equity issue, as we see some larger and larger grants, specifically long-term incentives and equity grants to some people. 

As a director, how do you counsel directors on these issues and the blowing up of internal equity, if you will?

Will: Yeah, I think from the internal equity perspective, there's a couple different approaches. Some companies will say this group is truly our transformational team that needs to have additional incentive or some kind of premium in place to attract and retain them.

And in that situation, we see companies apply, you know, maybe a 10, 20, 30% premium, often to the new-hire equity awards. And so that gets them in the door, and then treat them more traditionally as they stay at the company.

The other potential approach would be providing some kind of performance-based pool for that team. And, you know, that's going to create some inequities, but it also creates some competition at the company and brings the highest-performing talent to that team.

But the underlying theme there is doing something that is not programmatic, and it's kind of a one-time bump in the compensation so that you don't have those long-lasting inequities among the team.

Aalap: Yeah, and, Will, I think one of the ideas that you have there about this pool and that it's performance-based, I think, helps deal with some of that internal pay equity that Mark mentioned because, in effect, it allows for justification, right, of those higher dollar values because there's some performance attached to it.

So, individuals in the organization that are maybe not part of that special pool can at least look to that and say, "Well, you know, they deliver on results, and that's why the compensation is where it's at."

Will: Exactly. It's getting that product released, getting users adopted, having concrete milestone-based performance criteria can certainly help that.

Aalap: Yeah. Just wanted to drill down a little bit more on what's going on with SaaS companies. We've seen this before, this type of disruption and market volatility that's happened in the sector. Any counsel on how these SaaS companies can navigate this point in time? There's some uniqueness because they are competing with the AI companies for talent. But really, this has happened before, and it would be great to hear, what are sort of tried-and-true ways to navigate?

Will: Yeah, my counsel to clients in that situation is to really take a step back and reevaluate the compensation philosophy. Who are we competing with? Has that changed? Where do we want to be positioned in those markets?

Most of those SaaS companies are taking a fresh look at their compensation philosophy and reevaluating if what they've been doing historically still makes sense today, and spending that extra time on really developing the right peer group and market to understand where they need to be and where they need to be competing.

Mark: Can we get some real-life examples?

Will: Yeah, as we look at the IPO market, it's reopening in 2026, but very selectively. It's those high-flying, established, large companies that are going public. And a lot of those SaaS companies that raised capital four or five years ago have depressed valuations, are continuing to push out their IPO timeline. And so they, you know, in 2022, 2023, were on that two-year IPO timeline, and now we're in 2026, and it's still continuously two or three years out.

And so in those situations, working with the committee, reevaluating the compensation philosophy. Those companies may have been looking to large public company pay practices in anticipation of IPO. But maybe it makes sense to take a step back and let's look at one to two billion valuation private companies and what that comp strategy looks like.

One key difference would be the equity compensation. So instead of doing the annual value-based grants in RSUs, it may make sense to look at, you know, what are these grants as a percent of company and continue to grant options to really align with that two- to three-year timeline to IPO.

And for those long-tenured companies, it may also make sense to think about, what are our near-term liquidity strategies to provide some liquidity to employees who have been working for this IPO for a long time that keeps getting pushed out?

Aalap: Yeah, that's an excellent point, Will. I mean, this is something that is very top of mind for our larger private clients. And so thinking through this and making sure you're sort of putting forward the right strategy, and in a timely manner, whether there's a formal board or just the executive management team should really be thinking about it.

Will: Yeah, as the company stays private longer, those options stack up, and there's just more potential dilution in play. And what we've seen is it's very nuanced. It's no longer, "Here's the market for where our dilution should be at." Do we have a long-tenured team? Do we have a lot of founders in place? Or are we totally rehiring a new executive team at this stage to lead the transformation? And does it make sense to have, you know, 5% dilution this year to get that team in place and make sure that they're aligned?

And what I've seen with clients and boards is that boards are very receptive to more dilution and more equity spend as long as we take that time to be thoughtful about what markets are we competing with, who are these critical employees that we're hiring, and how do they stack up versus market.

And so having that process and discussions with the committee really helps determine what's the right move from an equity perspective.

Aalap: So, Will, just as we close up here, I mean, any parting thoughts for our AI clients? Any counsel you'd like to give?

Will: What I would say is focus on durability and flexibility. Those are kind of contrasting points, but when we think about the durability piece, this is a time of uncertainty and volatility. We've seen this before with COVID. SaaS itself disrupted the prior technology model. Now AI is creating another reset.

So, boards should think about where they want to compete, how they want to compete, and not redesign the compensation every time the market moves. But then evaluate that compensation program and the efficacy of it more routinely and frequently so that you're flexible to respond to changes and not doing total redesigns every time the market moves.

Mark: That's some really good advice. Will, this has been really great. Appreciate your comments.

Will: It's been my pleasure. Thanks so much.

Aalap: Yeah, Will, I really appreciate you taking the time to talk with us today. Take care.

Jake: Our thanks to Will for giving us a deeper understanding of how compensation markets are evolving within the tech sector. In our next episode, Malcolm Adkins will rejoin us to discuss how AI's value chain is extending beyond traditional technology companies into data centers, power, infrastructure, and energy-related businesses, and how this extension creates compensation questions around scarce talent, targeted premiums, and internal equity.

Until then, you can find all of our Unscripted episodes on Spotify, Apple Podcasts, pearlmeyer.com, or wherever you get your podcasts. Thanks, as always, for listening, and we'll meet you back here next week.