San Diego State University Research Finds Compensation Changes may be Necessary for Local Life Sciences Industry
SAN DIEGO (July 12, 2010) - The College of Business Administration at San Diego State University (SDSU) announced today that research findings of SDSU management professors indicated the current business model for most San Diego life sciences companies is not sustainable and models with more employee ownership may have a positive effect on these organizations. The research was published in the current issue of Compensation & Benefits Review.
Drs. Gangaram Singh and Lynn Shore, both management professors at SDSU’s College of Business Administration built on previous research which indicated that 70 percent of executives from venture capital-funded biotech organizations say “that the current business [model] is not a viable business option for the future.” Over 100 top executives of the local life sciences industry were surveyed on the usage of company ownership through stock distribution, profit/gain sharing and 401 (k). Singh and Shore concluded that employee ownership opportunities were predominantly used to attract, motivate and retain talented employees. Ownership options such as employee stock ownership plans and investment in company stocks as part of the 401 (k) plan were less commonly used.
“When employees make the choice to invest their financial resources in the company, then the process of building an alternative model will take a foothold,” reported Shore and Singh. “Otherwise employee ownership in its current form will serve as a transactional mechanism to hire, retain and motivate employees until an exit strategy is executed, such as partnering with a big pharmaceutical company. Employee ownership, in short, can provide a vehicle to effectuate the change in the business model, which is important for the long-term viability of the life sciences industry.”
“The biosciences industry is critical to San Diego, both in terms of their life-saving science and their impact on the local economy,” said Mary Ann Beyster, president of the Foundation for Enterprise Development, who funded the research. “It is imperative that the industry adopt a business model that attracts and retains talent in order to continue to meet both their scientific and business objectives. It is this research that can provide executives with some of the pieces to the puzzle in how to make that a reality.”
The Foundation for Enterprise Development was established by Dr. J.R. Beyster, founder of Scientific Applications International Corporation (SAIC) for the purpose of promoting business principles and practices that encourage free enterprise and advance science and technology innovations with impact on nationally important interests.
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