Guide To Negotiating An Executive Compensation Package

Are you discussing an interesting leadership role with an executive search firm or recruiter but are unsure how to handle the difficult conversation about executive compensation?

Executive salary negotiation can be a rocky road for many, especially since it’s not just about money.

Let me show you how to avoid embarrassing missteps and get paid what you’re worth.

What’s Included In An Executive Pay Package?

Your negotiation strategy will cover the base salary, bonuses and several perks.

While compensation packages of rank-and-file employees are typically limited to superannuation, paid leave and staff-wide benefits like paid parental leave or an employee counselling service, as an executive, your offer might have far more inclusions:

• Base salary.
• Sign-on bonus.
• Relocation payment.
• Annual performance bonuses.
• Equity or stock options.
• Company car and mobile.
• Housing or wardrobe allowances.
• Executive retirement plans.
• Additional insurances.
• Termination benefits.
• Healthcare plans or discounts.
• Training and professional development.
• Remote/flexible work arrangements.

Because the mix is likely to combine salary with a range of bonuses with both short and long-term incentives, you must evaluate each piece individually to understand how much tangible value each piece contributes.

Expert Tip. If performance-based bonuses and stocks are on the table, you’ll also need to do your due diligence on the company itself. Do you have enough information about its performance and future roadmap to know whether this horse is worth hitching your wagon to?

How To Negotiate Executive Compensation.

Firstly, take a moment to consider what you’re willing to compromise on, and when you’re willing to walk away. What does a win look like for you?

Additionally, you should:

• Negotiate in good faith and maintain your enthusiasm for joining the company throughout.
• Take your time to consider an offer and develop a counter-offer. If they want you, they’ll wait.
• Consider legal advice to define conditions you want included, and to review the final contract.

(Related: Top Executive Resume Writing Service In The U.S.)

1. How To Negotiate Your Executive Base Salary.

Executive base salaries vary widely — from $200,000 to over $5M for CEOs at the largest companies in the USA.

Find out what similar executives get paid based on your level of experience, your industry, and the company’s size and revenue by speaking with a trusted executive recruiter or a salary negotiation specialist.

Knowing roughly where you sit within a company’s benchmarked salary range for a role helps you ask for what you’re worth or respond reasonably to an initial offer.

Before you go into a negotiation, think about how you can:

• Communicate the value you’ll bring, be it tangible, cultural or reputational.
• Reinforce your commitment to growing with the company long-term.
• Forgo other perks or benefits in favour of a boosted base salary.

Employers are willing to pay more when the perceived value is high, and you’ve positioned yourself as the definitive choice.

Here’s an example of how you might remind a recruiter during negotiations that it’s worthwhile meeting your salary expectations:

“Within 12 months in my current role, I increased sales by over 15%. I’m excited to drive comparable results at XYZ Corp, which, based on your current forecasts, would add additional revenue equivalent to more than double my asking salary.”

Expert Tip. Increasing your fixed rate of pay increases the potential size of bonuses, because performance-based bonuses are usually paid as a percentage of your base salary.

If you can’t get a recruiter to budge much on the base salary, you might seek to formalise the timing for a future salary review.

This gives you an opportunity to make a case for a pay increase within 18 months, for example.

You could also leverage a lower-than-expected base salary to ask for additional non-monetary compensation components, a sign-on bonus, a better deal on equity allocations, or more control over your working conditions.

2. How To Negotiate Bonuses.

Cash bonuses tie your executive compensation to how effectively you get results.

Expert Tip. The maximum potential bonus if you reach targets can vary. It might be 20% or 100% of your base salary— make sure you know what’s on offer.

Since bonuses are linked to your base salary and performance, you can’t usually negotiate for a specific amount. But you can potentially negotiate the conditions around how bonuses are paid.

For example, maybe there’s leeway to negotiate on:

• The KPIs or milestones you need to achieve to be eligible for a bonus.
• How and when your performance against targets will be measured.
• Whether bonuses are paid in full or staggered (deferred) over multiple years.

3. How To Negotiate Stock Allocations.

Share-based compensation can significantly increase your wealth if a company goes public and its share price rises.

However, it does mean your payment might not be fully ‘realised’ for several years (maybe decades) — until you can sell your shares.

Negotiating for equity as part of your package can be a wise long-term move if you believe in the company’s growth prospects.

Compensation could be in the form of direct shares, restricted stock or, more commonly, stock options.

• Stock options allow you to purchase company shares at a reduced price, known as the strike price.
• They come with restrictions on when you can ‘vest’ — or exercise your option to buy shares — and when you can sell the shares, to encourage you to remain in your role.
• You can lose the chance to purchase stock at the lower price if you resign before the vesting period is done, or don’t exercise quickly enough.

Your earning potential from stock options will depend on the difference between the pre-set price you pay compared to a stock’s market value at the time you sell your shares.

There are also tax implications to consider.

When negotiating your executive compensation, you could ask for conditions to be included in your contract such as:

• Protections for your unvested equity in the case your employment is terminated.
• Reduced vesting timeframes, such as if the business is sold or merged.
• Extended timeframes for exercising your options if you resign your position. 

4. How To Negotiate Benefits And Perks.

There are so many potential benefits and perks you could ask for, so it’s important to know what matters most to you before you start negotiating.

Two vital elements of an executive compensation package that are worth haggling over include your working conditions and what happens if you’re let go or want to quit.

In terms of working conditions, you may want to negotiate for:

• The freedom to work remotely, reduced hours, extra time off or the ability to purchase additional leave as needed.
• The ability to enhance your earnings through side projects and consulting in the same industry.
• Additional time or budget for professional development, volunteering or mentoring.

In terms of termination and post-employment, you might ask for:

• Shorter notice periods to enable you to switch jobs more readily.
• Severance pay of up to six or 12 months depending on your seniority.
• Clauses that entitle you to severance if you quit for legitimate reasons.
• Clauses about unjust termination, as executives may not be protected from unfair dismissal.
• Looser ‘non-compete’ clauses, to increase your chances to find a new role quickly.
• Alterations to ‘garden leave’ clauses where relevant.

Don’t Blow Up Your Career While Negotiating Your Compensation Package.

In roles like CEO, COO or Executive General Manager, you’re held accountable for a company’s long-term success, growth and reputation.

The size and scope of your executive compensation package should reflect both the value you bring and the responsibility you’re shouldering.

Robust negotiation is expected, and worthwhile—but don’t burn your bridges.

How you handle hard conversations gives people a clear sense of your leadership style, so it’s important to demonstrate the kind of empathy, respect and aplomb you’ll bring to the company you’re looking to join.

Irene