What to Pay a Chief Executive Officer
Once you’ve chosen when to hire a CEO, what to look for in a CEO, and how to hire a CEO, you’re well on your way to hiring a CEO for your company. Once you’ve asked some insightful interview questions and chosen a few final candidates for the position, it’s time to decide what to pay a CEO.
The salary of a chief executive officer varies widely between companies. Here are five factors that can influence what to pay a CEO.
1. Company and CEO performance
For many companies, what to pay a CEO depends on how well the company and the CEO are doing. Some companies base the CEO’s salary entirely on results – the more successful the company is, the more the CEO earns for the year. Other companies have a set yearly salary for the CEO, but offer him or her a bonus based on how well they adhere to their job requirements. Ideally, this method gives the chief executive officer an incentive to help the company grow.
2. Company Size
The size of your company is one of the biggest factors affecting CEO pay. The CEO of a small to mid-size company tends to make less than the CEO of a large international company. This is mostly due to the company’s available resources and the role of the CEO.
3. Other types of compensation
Pay is not limited to salary for many executives. Some companies give executives equity, stock, cash bonuses, and other benefits in addition to a standard paycheck. When calculating what to pay a CEO, remember to include the value of these benefits in your final total.
A CEO working for a company in a remote location tends to earn less than a CEO working for a company located in a large city. Because large cities tend to have a higher-than-average cost of living, salaries for these jobs tend to be higher in order to compensate. Likewise, since the cost of living is lower in a remote area, salaries in these areas are not quite as high.
5. Skills and experience
If a CEO possesses an uncommon skill that is relevant to their position, he or she tends to earn a higher salary. Because high-level skills can be hard to find, a chief executive officer with these skills is valuable to your company. Similarly, high-level experience in a relevant field tends to make a chief executive officer more valuable. Because candidates with more skills and experience have more to offer your organization, they are generally compensated more for their efforts.
What factors did you use to decide what to pay a CEO? Let us know in the comments.
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