Executive Compensation Structures

When Rajiv was offered a CEO role at a mid-sized tech company, the headline number looked impressive — nearly 40% higher than his current pay. But when he unpacked it, he realized: The fixed pay was modest. A big chunk came as ESOPs vesting over 4 years. The bonus was tied to aggressive targets that depended on a market expansion not yet tested. On paper, it was a dream. In reality, it was the board’s way of testing his skin in the game. This is the politics of executive compensation. It’s not just salary — it’s strategy. Companies use pay structures to align incentives, retain leaders, or quietly signal risk. Don’t just look at the CTC headline. Break it down. Ask: Is this pay designed to retain me, motivate me, or test me? Negotiate not just for today’s number, but for tomorrow’s value.

9 years ago when we started Pavilion, we issued the Bill of Rights for GTM Executives with 5 basic ideas for executive compensation at high-growth companies. Here’s what they were and what I think of them now: 1. The right to due diligence The right to know what you’re getting into, including: valuation information, team performance, an understanding of the cap table and related preferences, and anything else material to your ability to both succeed and enjoy the role. VERDICT: Yup, still agree. Most of the time if they won’t share information it’s a big red flag. 2. The right to aligned compensation A request to reframe CRO comp (and sales exec comp generally) from 50/50 base/variable to something closer to 60/50 or 70/30 (and yes, that might mean lowering the OTE. Not working backwards from an OTE number). Execs shouldn’t be paid like AEs and highly variable cash comp packages for executives push the company out of alignment. VERDICT: Yup, still agree. 50/50 CROs just don’t make sense. Especially when asking for quarterly commissions. That’s too transactional for someone who is supposed to be building long term value. 3. The right to severance GTM execs have a short shelf life. They get fired a lot. It’s fair to request that the company pays a penalty for that decision as an incentive to ensure everyone is intentional about making the relationship work and to provide stability to a GTM exec’s career. At the time, I recommended 6 months. VERDICT: Still agree. However, I think 3 months of base is more appropriate and 6 months is OK after the exec hits a performance or tenure milestone. 4. The right to liquidity Not meant literally. Just that execs deserve more of the same rights that founders and investors have so that the likelihood of their equity becoming cash is increased. This would include extended exercise provisions post departure, double trigger acceleration, or some consideration when secondary is offered. VERDICT: Mostly agree. I don’t think 10 year exercise periods are fair. I think 2 years is fair and that’s what we offer. I think double trigger is fair but single trigger is not. Mostly, I think we should all work together to restore people’s faith in equity by building valuable companies & then find ways to reward the people that help us get there. 5. The right to consult Hey, if you’re going to fire me, I should at least have a right to do some advisory and side hustle stuff on the side. VERDICT: I still agree. The world is changing and the toothpaste is out of the tube. People have portfolio careers & I think that’s ok in an open free labor market. OVERALL It still holds up. (And I say this as a CEO on the other side of the table now) Want to learn this stuff cold? We've got your back. Join Pavilion: https://lnkd.in/ehXGBGGH

There’s no such thing as an equitable equity structure in Professional Services. In every Partnership or management equity plan, there are winners and losers. More often than not, it’s the next generation of leaders, Principals, Senior Managers, high-performing non-equity Partners, who end up subsidizing the upside of those who came before them. They’re driving growth, taking on commercial risk, managing key client relationships… all while waiting for a seat at the table that keeps getting further out of reach, or never arrives at all. Meanwhile, legacy Partners continue to benefit from discretionary bonus schemes, outdated profit shares, and retirement-triggered liquidity events, none of which reflect current contribution or value creation. And this isn’t just an issue of fairness. These legacy structures are actively holding firms back, creating misalignment, eroding retention, and exposing serious risk around succession and leadership continuity. But the model is changing, and fast. Drawing on data from over 200 firms that have moved beyond traditional Partnerships, we’ve found that more than 60% of non-equity leaders in PE-backed firms now participate in structured value sharing programs. In many cases, we’ve seen payouts of 3x or more base salary at exit, without a single share being issued. Tools like phantom equity, B-units, and deferred bonuses with uplift multipliers have become standard in high growth platforms. These models reward real performance, strengthen retention across the investment cycle, and scale with the business, without the complexity or dilution of conventional equity. So, what’s driving the shift? A sharper alignment between compensation and business performance. A stronger emphasis on succession planning and leadership development. And, perhaps most importantly, a growing recognition that “wait your turn” is not a viable talent strategy. Firms that fail to evolve are losing their best people to platforms that offer clarity, upside, and a genuine pathway to long-term reward. At a time when leadership talent is harder to retain than ever, compensation needs to reflect future value creation, not just past loyalty. The firms that get this right aren’t just staying competitive, they’re building cultures that scale.

𝗧𝗵𝗲 𝗚𝗖 𝗽𝗮𝘆 𝗴𝗮𝗽: 𝗪𝗵𝘆 𝗰𝗼𝗺𝗽 𝗰𝗼𝗺𝗺𝗶𝘁𝘁𝗲𝗲𝘀 𝗴𝗲𝘁 𝗶𝘁 𝘄𝗿𝗼𝗻𝗴 (𝗮𝗻𝗱 𝗵𝗼𝘄 𝘁𝗼 𝗳𝗶𝘅 𝗶𝘁) “We offered 75th percentile comp and still lost three GC candidates. What are we missing?” I hear this from CEOs and comp committees more often than you’d think. The answer? Everything. Here’s the disconnect: most comp committees benchmark GC pay against other GCs. Logical on paper. Misleading in practice. The GCs you want aren’t comparing themselves to other lawyers. They’re looking at your CFO, CRO, and other executives with a seat at the strategy table. That’s how they see themselves, and how the best-performing companies see them too. The market data reveals the pattern: 𝗧𝗿𝗮𝗱𝗶𝘁𝗶𝗼𝗻𝗮𝗹 𝗖𝗼𝗺𝗽 𝗦𝘁𝗿𝘂𝗰𝘁𝘂𝗿𝗲 • Base: 60–70% of package • Bonus: 20–30% (often discretionary) • Equity: 10–20% (if any) 𝗪𝗵𝗮𝘁 𝗧𝗼𝗽 𝗚𝗖𝘀 𝗔𝗰𝘁𝘂𝗮𝗹𝗹𝘆 𝗖𝗼𝗺𝗺𝗮𝗻𝗱 • Base: 40–50% of package • Bonus: 20–30% (tied to business metrics) • Equity: 30–40% (meaningful upside) I’ve seen candidates turn down higher guaranteed packages in favor of lower base salaries with real equity potential. They’re thinking like owners. And they expect to be treated like one. Here’s how smart companies structure GC compensation: 𝟭. 𝗕𝗲𝗻𝗰𝗵𝗺𝗮𝗿𝗸 𝗮𝗴𝗮𝗶𝗻𝘀𝘁 𝗯𝘂𝘀𝗶𝗻𝗲𝘀𝘀 𝗹𝗲𝗮𝗱𝗲𝗿𝘀, 𝗻𝗼𝘁 𝗷𝘂𝘀𝘁 𝗹𝗮𝘄𝘆𝗲𝗿𝘀 Look at your CFO and CHRO packages, not just legal surveys. 𝟮. 𝗧𝗶𝗲 𝗶𝗻𝗰𝗲𝗻𝘁𝗶𝘃𝗲𝘀 𝘁𝗼 𝗰𝗼𝗺𝗽𝗮𝗻𝘆 𝗽𝗲𝗿𝗳𝗼𝗿𝗺𝗮𝗻𝗰𝗲 • Revenue growth • Deal velocity • Exit readiness milestones • Not just departmental KPIs 𝟯. 𝗠𝗮𝗸𝗲 𝗲𝗾𝘂𝗶𝘁𝘆 𝗺𝗲𝗮𝗻𝗶𝗻𝗴𝗳𝘂𝗹 If your GC doesn’t have real upside in an exit, why would they drive toward one? 𝟰. 𝗜𝗻𝗰𝗹𝘂𝗱𝗲 𝗽𝗲𝗿𝗳𝗼𝗿𝗺𝗮𝗻𝗰𝗲 𝗺𝘂𝗹𝘁𝗶𝗽𝗹𝗶𝗲𝗿𝘀 Packages should scale with company success. I’ve seen this model work repeatedly. PE-backed companies offering below-market base with aggressive equity consistently win top candidates. These GCs see themselves as value creators, growing both the business and their stake in it. How you structure GC compensation says a lot about how you view the role. Pay for legal support, and that’s what you’ll get. Invest in a business leader, and you unlock real transformation. Share your compensation philosophy below. #ExecutiveCompensation #ChiefLegalOfficer #TalentStrategy --- 𝘊𝘰𝘮𝘱𝘦𝘵𝘪𝘵𝘪𝘷𝘦 𝘎𝘊 𝘱𝘢𝘤𝘬𝘢𝘨𝘦𝘴 𝘳𝘦𝘲𝘶𝘪𝘳𝘦 𝘮𝘰𝘳𝘦 𝘵𝘩𝘢𝘯 𝘭𝘦𝘨𝘢𝘭 𝘣𝘦𝘯𝘤𝘩𝘮𝘢𝘳𝘬𝘪𝘯𝘨. 𝘔𝘺 𝘵𝘦𝘢𝘮 𝘢𝘯𝘥 𝘐 𝘩𝘦𝘭𝘱 𝘤𝘰𝘮𝘱𝘢𝘯𝘪𝘦𝘴 𝘥𝘦𝘴𝘪𝘨𝘯 𝘤𝘰𝘮𝘱𝘦𝘯𝘴𝘢𝘵𝘪𝘰𝘯 𝘱𝘢𝘤𝘬𝘢𝘨𝘦𝘴 𝘵𝘩𝘢𝘵 𝘢𝘵𝘵𝘳𝘢𝘤𝘵 𝘭𝘦𝘨𝘢𝘭 𝘭𝘦𝘢𝘥𝘦𝘳𝘴 𝘸𝘩𝘰 𝘥𝘳𝘪𝘷𝘦 𝘣𝘶𝘴𝘪𝘯𝘦𝘴𝘴 𝘳𝘦𝘴𝘶𝘭𝘵𝘴, 𝘯𝘰𝘵 𝘫𝘶𝘴𝘵 𝘮𝘢𝘯𝘢𝘨𝘦 𝘭𝘦𝘨𝘢𝘭 𝘳𝘪𝘴𝘬.

Are you trying to ensure your key employees don’t jump ship? Many RIA owners struggle with how to reward and retain top talent without giving away actual ownership in the firm. The good news is that there are creative tools available that give employees a sense of participation in the firm’s growth while allowing you to maintain full control. One such tool is the use of profits interests. This structure gives employees the ability to participate in the future upside of the business without handing over any current equity value or management rights. In practice, it means they only share in growth from the point of the grant forward, which makes it a flexible and appealing way to reward loyalty and long-term performance while keeping ownership clean. Another approach that has become popular is phantom equity. Phantom equity mirrors the economics of actual equity but does not make the employee a legal owner. Instead, it promises cash payments tied to the value of the firm or its revenues at some future date. Employees feel like owners because their financial rewards rise as the firm grows, but you avoid the complications of actually issuing units or stock. Also, some firms turn to bonus compensation triggered by a change of control. This means that if the RIA is ever sold, certain employees are rewarded with a cash payout tied to the sale proceeds. For employees, it creates a clear incentive to stay engaged and help drive growth leading up to a potential transaction. For owners, it creates a retention hook that keeps the team committed until the moment the firm’s value is realized. These structures not only align employee incentives with the success of the firm, they also create a culture where key people feel they are truly invested in the future. The important part is getting the design right so that the plan motivates your team, protects the firm, and is tax efficient for everyone involved. We help RIAs structure these kinds of programs. If you are looking for a way to reward loyalty, retain top performers, and strengthen the long-term stability of your firm, now is the time to explore these options. Let’s talk about how to tailor an incentive plan that works for your business and secures the future of your most valuable asset—your people.

New Reward Structures The PE compensation offer that changed everything. Five years ago, PE-backed HR roles meant lower base pay and corporate uncertainty. Today? I'm seeing packages that rival tech companies. But with a twist that changes everything. PE compensation evolution: ✅Base salaries competitive with Fortune 500 ✅Equity participation becoming standard ✅Success tied directly to exit multiples ✅'Betting on yourself' mindset required But here's the catch: This isn't guaranteed money. Your success determines the company's exit value. Your exit value determines your payout. PE has created the ultimate alignment: your wealth grows with the company's success. No more hiding behind 'employee satisfaction' metrics. Your compensation depends on business results. Are you ready to bet on your ability to drive EBITDA? Because that's what PE demands, and rewards. #ExecutiveCompensation #PrivateEquity #EquityParticipation #PerformancePay #CulturalAlignment

Just because you’ve made it to VP does not mean you are negotiating like one. Over the years, I’ve watched seasoned executives leave millions on the table because they didn’t know the right questions to ask or didn’t realize they even could. Here are the 5 most costly mistakes I see senior leaders make in compensation negotiations, and how to avoid them.   1. Leading With Gratitude, Not Leverage Opening a negotiation with “I’m so thankful for the offer” can unintentionally signal that you are in acceptance mode rather than influence mode. Gratitude is important, but not in excess, as it can signal deference and impostor syndrome, which are detrimental to the level of influence you need for a successful negotiation. Leverage begins when you communicate your enterprise-level impact and the unique value you bring to the table.   2. Negotiating Base and Bonus Only Many executives focus only on the base salary, annual bonus, and perhaps a signing bonus. While these are important, they are short-term. True executive wealth is built through equity, long-term incentive plans, and refresh grants. The most strategic leaders dig into the details: How often are equity refreshes granted? What are the company’s valuation comps? What exit scenarios are being considered? These questions are where future wealth is built.   3. Overlooking Triggers and Vesting Terms Equity is only as valuable as the terms attached to it. You can end up with what I call "monopoly money" if you do not include the right elements to safeguard your equity. Too many executives accept restricted stock units or options without reviewing vesting schedules, cliff periods, or acceleration clauses. These can be the difference between a life-changing payout vs walking away with nothing if the company is sold or restructured.   4. Ignoring the Politics Behind the Package Compensation is not just an HR formula. It is a reflection of how the leadership team perceives your strategic value. Decisions are often influenced by politics, power dynamics, and positioning long before a single number is discussed. Smart executives manage perception and visibility well in advance, ensuring that their compensation conversations start from a place of strength.   5. Forgetting Strategic Perks That Signal Power Executive-level perks are more than nice-to-haves. They are infrastructure for long-term success. Coaching, wellness stipends, personal assistants, sabbaticals, and board education not only make you more effective, they also signal to the organization that you are a high-impact, long-term player. The best leaders use compensation talks to secure the support systems that allow them to perform at their peak. Continue in comments...