For mid-market companies, the average board encompasses nine directors with approximately 80% of those being independent directors. There is a direct correlation between the size (revenues) of a company and board director compensation. For purposes of this discussion on mid-market companies, the revenue range is between $100M and $3B. If we are referring to financial services, this is in terms of assets and in that case, a range of $100M to $6B.

Overall, there has been little change in board compensation over the last few years, as well as the percentage balance between cash compensation and equity (typically 45% and 55% respectively). The components of board compensation I will review in today’s post include board retainers and fees, committee retainers and fees, stock options and full value stock rewards. A deeper detail of these components is below-

Board Retainers & Fees– this is the annual board retainer and all board meeting fees earned during the given year. This is derived from in-person meeting fees, conference call meeting fees and total board meetings held in the year; equates to approximately 40% of total compensation.
Committee Retainers & Fees– annual committee retainer and all committee meeting fees during the year; most directors serve on two committees; equates to approximately 5% of total compensation.
Stock Options– this is valued by the grant date fair value award that is reported by the company; equates to approximately 6% of total compensation.
Full Value Stock Awards– includes stock and stock unit awards; equates to approximately 48% of total compensation.
Total Compensation– includes all board retainers and fees, committee retainers and fees, stock options and full value stock awards.

Total annual board compensation breaks down to approximately $60,000 for board retainers and fees, $8000 for committee retainers and fees, stock awards of approximately $70,000, stock options of $10,000. Therefore, a total annual compensation of $155,000 on average – not a bad deal! The lowers end of the revenue range offers total compensation of approximately $120,000 while the higher end of the revenue range offers total compensation of $185,000. If you apply the percentages shared in each of the components, this will provide the dollar equivalent for the low and high revenue ends.

Board director compensation does vary by industry, with the technology industry being the highest compensated. Next in line is healthcare and the least compensated are board directors of banks. As for banks, the compensation is typically less than 25% of what technology companies compensate their board members. In terms of stock, technology and healthcare hold the highest percentages while banks offer the least in stock. Regardless of industry, stock awards are preferred over stock options.

As you can see, there is an overall greater compensation reward through stock options and full value stock awards. Many executives do not understand this and set their sights on the cash compensation (board retainers/fees and committee retainers/fees), which is not the way one should monetize the long-term value of independent directorships. In my opinion, if you can’t see beyond the cash, then you are likely not seeing the entire picture as a “shareholder” of the company and, in turn, should not be serving on boards at all.

The Salary Question

In an earlier post regarding step four of preparing for interviews, I discussed how to handle what seems to be the most difficult question for executives in the interview process – what is your current compensation?  How you answer this question is the platform for how the rest of the negotiating process will go, should you get to that stage.  This can lead to a great success or your biggest misstep.  Should you get past the trap of discussing compensation too early, you will likely mitigate having already started negotiating against yourself.
If you must and have no other alternative, you should try to get the interviewer to talk first and share what they view as the salary range for the position. If that fails, then initially speak in terms of ranges, not specifics, and more so in terms of what the market demands.  Without being too redundant, try not to set yourself up and negotiate against yourself!

The Offer Process

I am not a fan of “verbal offers”, because they can simply disappear. A tactful way to handle this is to state that it will help you better review the offer if it is in writing.  As you start the process, ensure that you meet with the hiring executive so you can express that you are thrilled about the offer, eager to start, but that you have a few questions – set an appointment.  This is the tee-up for your negotiation.
Now at the meeting, open the discussion on a positive note, emphasizing that you think this is a terrific opportunity and that you are excited about the offer. Then lead into the fact that you have a few questions.  Remember that you are asking questions and not making demands.  Ask open-ended questions, then be silent and let them respond.  These questions can range from how your research shows that the market demands are significantly higher than what the offer is, asking about how signing bonuses are handled, what you could expect with the bonus and/or stock option structure/program.

To justify your position on negotiating compensation, emphasize how you will either make them more money, drive profits, save them money, or solve their problems. You can also play the card that you already have another offer or still have your current role that you are quite happy with. You should end the meeting repeating how excited you are about the role and emphasize that is has been a great meeting.  Close with that fact that you both have things to think about, but how you are also definitely looking forward to reaching an agreement and getting started.

Negotiable Items

There are items you can negotiate and other items that you should never attempt to negotiate. You can negotiate total cash compensation and equity (base salary, incentives, bonuses, guaranteed portion of bonus, signing bonuses, stock options or equity).  You can also negotiate your title and composition of your staff, as well as severance and outplacement (part of the employment agreement) and vacation time and/or sabbaticals.

Other items can include the elements of a relocation package, international relocation, expense accounts, travel requirements and benefits, temporary living arrangements, club memberships, professional organization dues, raise and review schedules and accelerated promotion and salary increases. The elements in relocation packages are frankly not as generous as they used to be, so be sure to do your research in this area before broaching the subject.  Alternatively, items that you should not negotiate include health insurance and benefits, sick leave and retirement plans.

Prioritize Items

To be realistic, you will not get all of the items you are asking for, so it is important to prioritize. Create a top ten list of items to negotiate with item one being the most important. You should be asking about at least five items but no more than ten.  Create three columns – best case, worst case and most likely. Map each item into each category and decide what is most important to you.  From there you have your priorities and that is what you negotiate for.  In my opinion, you counter one time and only one time.

All in all, patience is the key ingredient. It is the most difficult part of the process.  Let them get back to you and try your best to temper your eagerness.  Most importantly, never negotiate yourself out of the offer.

Now you are in transition and in the job market. Maybe you do not have a resume, have never done your own search, have a minimal network, or just don’t know how to go about things. Your first turn is to the executive search firms. You do your research, figure out which person you think is the right person and you send the email or make the call. Then… silence…crickets…and you get frustrated and wonder why they simply don’t return your calls. The reason is simple – they do not work for you and you are not their client.

Sports agents serve star athletes, literary agents best-selling authors and Hollywood agents top-grossing actors. So, why can’t executives be served by an agent? They can and they now are. What is an Executive Agent and how do they work?

How It Works

When an agent takes the time to work with the executive on getting clear about their skillset, track record, success and value proposition, the executive can be effectively branded in the market place and a sound strategy is set for actual market execution to follow. Assessment tools of varying nature, including subjective and analytic, should be used to ensure the agent and the client are investing in the most efficient and effective plan. At the outset, this must be crystal clear and aligned so that expectations are set and agreed upon. Without this, the search will fail.   There is no magic to this – it is one call after the other, leveraging the network – not carpet bombing or meaningless mail campaigns.  Success comes from optimizing the executive’s value proposition toward market demand and doing the hard work to reach a successful conclusion.

The agent should understand the executive’s value proposition down to their core, the leading companies and the funding sources in their industry. The agent must leverage their own network to open doors when more traditional methods such as cold calling does not bear results.  The client must be in the game as well, collaborating with their agent on how to leverage aspects of their own network. With that, the team can reach a faster, more fruitful conclusion to the search.

Executives engaged in their current role, but beginning to aspire to something else, do not have the luxury of time, capacity or resources to personally execute their own search. If their interest is in independent directorships, handled on their own, the task will be even more arduous.  The executive may also be concerned about confidentiality and need someone who knows how to work very delicately around their situation.

The agent’s process should shorten the hiring cycle and increase the chances of a successful experience for both the executive and the company. While the agent can’t interview on the behalf of the executive, the agent should prepare, practice, support and counsel the executive for the interview. The agent should have the expertise and be equipped to negotiate and close the offer on the executive’s behalf.  All in all, the agent should get the executive advanced far faster and more efficiently than anyone else.  It must be a boutique, high-touch, high-quality experience.

Today’s Market

It is ever more difficult for a C-Level executive to find what interests them next and in a proactive way to make it a reality. Challenges continue with where to find the hidden, more meaningful opportunities.  With companies doing more with less resources, it is difficult to get the attention of hiring executives and board members.  There is less of an appetite for the time it takes to invest in “exploratory” conversations.

C-level executives realize that do-it-yourself or seeking the interest and engagement from retained search firms still doesn’t work. It is a brutal reality, but they work for the company, not the executive. The model has not changed and is not going to change. However, executives need to be realistic about the true value they bring to the marketplace.  The executive may have been a CEO or COO at one time in their career, but that does not mean that they are CEO caliber in today’s market.  Being realistic is a critical ingredient to success.  Without it, the search will be a fallacy.

As on day one, Summit is completely retained by executives (our clients) and unlike a search firm, Summit takes absolutely no fees from the hiring entity. Built upon an initial foundation in the technology industry, by demand Summit has expanded across the country and into a myriad of industries.  We hold a portfolio 25 to 30 C-Level and Board Director Executives.  Summit partners with companies, private equity firms and search firms providing access to executive talent for their company, portfolio companies or executive searches.  We deliver value to one of the most complex pieces of the value chain – human capital at the executive and board level.