Adventurous CEO Candidate Turns Company Around
Michael has come up through the ranks to become the next CEO of the medical device company where he has spent most of his career. He works hard and plays hard, as a single guy in his 40s who is been dedicated to his career and a handful of adventure sports. He is willing to take risks in watersports, enjoying the adrenaline rush from wakeboarding and powerboat racing and once, he even tried skydiving. He has turned the company around during his first three-year contract as CMO. Not only has he proven himself to his Board, but to everyone. His performance has earned him a reputation as a known quantity. Competitors and recruiters have come to entice him to consider other CEO positions.
A born leader who traveled the world as a young man, Michael is super-driven and confident of his own views. He is a strong sales and marketing leader who leads with his authenticity and generosity. All too aware of his own shortcomings, he has made a few mistakes by failing to ask the right questions. Fascinating and super energetic, he is a workaholic who thrives on little sleep. He lies awake and worries about what he doesn’t know out there that could hurt him. His watchful demeaner borders on insecurity. What has he missed? What might cause him to regret a missed signal or a foregone opportunity? As hard as it is to admit, his ego gets in his way. He has made some of his best decisions when he has reached out to others for input.
Michael is approaching his maximum Total Direct Compensation (TDC) range heading into a major performance review and salary negotiation. He is well rewarded in base salary and bonus, but he is convinced his long-term incentives (LTI) do not reflect his performance. He has always relied on the Board and recruiters to establish his market value. Despite the pay range set by the Board, his long-term incentives could be much greater given his performance. He is not looking to make a move and he is excited about his future in his next role. He is in a very strong position as he approaches a major review and contract extension.
Now that he is coming up for his promotion review, what is he missing? Beyond the board room, who advises the C-suite on their executive compensation proposals?
The Case for Mega Grants
With the new product line positioning the company for rapid growth, he is planning to make the case for “special” or mega grants (i.e., one-time equity grants of more than $50 million over a multi-year vesting schedule). Now he needs to learn more about mega grants and gather the data to make his case to the Comp committee.
He is looking for independent analytical resources to support his position. He is introduced to M3x Analytics, a firm that supports executives on fair and competitive compensation decisions. “Executives can often impact their own compensation by monitoring the current market and building a case for deviating from market median,” said M3x Analytics founder Linda Steffen. “I have seen the most significant pay adjustments initiated by executives themselves using pay data,” she said.
M3x has extensive experience and data resources to evaluate a C-suite executive’s pay. In addition to combing through public data, Steffen held senior compensation consulting roles with various firms including Meridian, Willis Towers Watson, Compensia and Deloitte, before running the compensation group at Amazon.com. M3x Analytics has full knowledge of board compensation practices and the risk-reward from the executive’s and shareholders’ perspective.
Michael learns his total compensation ranks in the 75th percentile, while most medical device CEO candidates are north of 90th. He could be a strong candidate for mega grants. The medical device field is booming and he has heard other named executives of peer companies are beginning to get them. These are factors that could support alternate pay levels rather than standard median pay levels.
“Public company compensation committees are generally interested in pleasing the management…as long is there is good data to support governance practices,” Steffen said.
Armed with the data and right approach, Michael is ready to advocate for himself as he negotiates into his new role’s contract for the next five years. The future is bright and he is ready to roll.
Team of Champions
He senses that his financial position is well beyond mere financial independence. He would like to build of a team of champions to optimize his wealth and minimize taxes for his financial well-being. Linda is an executive compensation data specialist, his CPA advises him on tax-advantaged strategy and SFG is his executive wealth planning financial advisor, incorporating LTI in his overall financial plan and automating triggers related to stock awards.
*The name, likeness, and circumstances in this example are a fictional composite of facts from executives similar to actual SFG Clients.