Management Pool Size / CEO Compensation
February 10, 2021
by a professional from University of Colorado at Boulder in Colorado Springs, CO, USA
It's a deal with $100M in Value Creation over 5 years... I need to pay powerful CEO and Management team. Any guidelines, suggestions, benchmarks? I'm thinking 6% of value creation total for both - 3% for management team and 3% for CEO. Any thoughts, feedback, cautionary tales?
in Seattle, WA, USA
You'll need a clear definition of "value", and "creation", not only to differentiate from what is there already (or close enough in potential to perhaps be excluded in the reckoning), but also because perception of value will change over time, and indeed the nature of the value itself may change. The possible change vectors are myriad and five years is both an eye-blink and an eternity. Does a new market opportunity count? How about an acquisition? Etc...
There's also some variance in perception and, of course, responsibilities within the team. Do you keep the numbers the same for all to keep things "fair"? Some may see a number as a pittance, whereas others may see a windfall.. Similarly the nature of their roles may constrain (or magnify) the effect of their contributions, not to mention the potential influence of larger events such as already alluded to above.
Would also be good to set some "stretch goals", as well as some minimums to be measured against periodically.
Finally, all these numbers (and how they are effected "traditionally") can vary widely by industry, it would be worth seeing what typical numbers are in this sector as a baseline to work from.
from National University of Ireland, Galway in Seattle, WA, USA