In 2021, venture capitalists poured money into tech, which led to higher salaries and huge funding. Now, two years into the pandemic, funding has slowed to a halt. With record high inflation and supply chain issues, most companies are struggling to stay relevant. During such a time, having to negotiate executive compensation can seem to be an uphill task. However, developing fine negotiation skills is crucial to succeed in any industry.
Executive compensation primarily refers to compensation packages for business leaders, senior management, and executive-level employees of an organization.
But just because it is difficult does not mean that you should settle for less than what you are worth in executive pay. A good compensation package shows how much the company values you as an employee. In recent times, there has also been an uproar on the CEO pay rise.
The Dos and Don’ts of Executive Compensation
In today’s market, it is important to look at the non-cash benefits just as deeply as the cash benefits while negotiating a salary. While
1. Due Diligence
Before accepting any offer or making any counter offer, ensure that you have done your due diligence. Back your ask with the relevant market research and explain the value you bring to the organization. You must also be aware of the non-monetary benefits the company offers so that you have room to be flexible. You must also be clear on the company’s standing in the market. While a company might offer a great executive compensation, as a prospective employee you must know whether the company is reliable and if it will pull through, through a tough market.
2. Extended Exercise
Typically, executive pay includes equity. Once an executive leaves a company, they usually have 90 days to decide what to do with their shares. It would be wise to ask for more wiggle room and push it to a year. In this manner, you will have time to decide what is best for you financially. Although it costs the company little, it is one of those things that you don’t get unless you specifically demand it.
3. Aligned Compensation
When you are part of upper management, it is best to have aligned compensation practices that ties executive compensation to aligned goals of the company. When there is no alignment, executives tend to focus on short-term goals that may or may not be beneficial in the long term. A 70/30 base salary to bonus for the executive team ensures teamwork and helps foster greater collaboration. No one is forced to take on the role of the lone wolf, and it adds value to the organization as a whole.
4. Severance
As companies grapple with cost cutting and restructuring exercises, senior executives must have a clearly defined severance clause as part of their compensation package. Three months’ severance is the bare minimum while six months is the standard for executives. Here, it is important to go over the fine print with the help of a legal executive. Making things crystal clear right at the start is important to avoid legal trouble and heartache down the road.
5. Consulting
It is always wise to have more than one source of income. If you can leverage your skills for a consulting gig on the side, do remember to build that into your compensation package. It is one of the surest ways to maintain your financial health during troubled times. Take a long hard look at yourself, to figure what you can and cannot compromise. At the negotiation table, work with your future employer to find a middle ground that works for both of you. Alignment can be tricky but is not impossible. Former Apple CEO Steve Jobs was considered a master in the art of negotiation.
Ultimately, executive pay must be tailored to suit your needs while fulfilling the company’s obligations. Whether you desire a cash-heavy package or prefer greater benefits, remember to check whether the company’s culture and goals align with your value, before signing on the dotted line.
