According to the Economic Policy Institute, CEO compensation surged 14% in 2019 to $21.3 million year-over-year, so they now earn 320 times as a typical worker. But Monique, I’m not a CEO. Yes, I know. I simply wanted to share how much the top tier is amassing. If they can gain a 14% increase, why can’t you?
Pay increases are top-of-mind for me for a couple of reasons.
A couple of months ago, a Board member of Dress for Success Seattle reached out about speaking at their September Professional Women’s Group meeting. I’ve been researching the latest best practices for the upcoming meeting this week. Since no one ever said, “I don’t need any more money,” here’s what I’ve learned that could help you in your next negotiation.
Lessons from Book Review “PAY UP!”
At the same time, I’m fortunate that the stars aligned. One of my Portland, Oregon colleagues, Kate Dixon, an executive compensation expert and a certified leadership coach, asked me to review a draft of her upcoming book, “PAY UP!”
First thing, I can’t wait for her final book! Whether college grads or executives, sage advice awaits when you read her inaugural tome for anyone changing jobs. Key takeaways: (1) don’t be a jerk when negotiating, (2) conduct your compensation research, (3) practice your ask and answers, and (4) communicate how you will add value to a company’s top or bottom-line results. These same principles apply when you remain in the same company and are seeking additional compensation.
Focus on Total Compensation vs. Salary
Public companies share in their annual proxy statements executive compensation. In 2019 Microsoft CEO Satya Nadella received $42.9 million in total compensation, up from $25.8 million the previous year. Some might argue that excessive, but did you know, his base salary was $2.3 million, a fraction of the total? Most of his pay came from stock awards. This extreme example proves that the total compensation vs. just the salary component makes a huge difference. In this case, over $40 million! Believe it or not, this was an actual compensation decrease from 2014, when Nadella secured an $84 million compensation package.
It begs the question, what makes up total compensation? It depends whether you’re working at a Fortune 500, startup, privately held company, government agency, or not-for-profit.
So, besides salary and stock awards, what else factors into your potential compensation?
- Business travel, e.g., private jet
- Car lease allowance
- Cash bonuses: short and long term
- Company equity
- Security-related services
- Stock options
- Yearly award incentives, e.g., all-expense-paid luxury vacations
But wait, there’s more.
Most of my volunteer clients at Dress for Success Seattle focus on the hourly rate or salary vs. the total compensation. Big mistake. Paid medical and dental insurance, retirement contribution accounts, such as 401Ks, flexible schedules, telecommuting, vacation policies, childcare, and transportation reimbursement, wireless phone, Internet reimbursement, and college tuition contributions are equally important.
Negotiating Compensation
One of my clients mentioned Andrew LaCivita, a career and leadership expert out of Chicago. I started following him recently. Today, he had an insightful YouTube about how to negotiate a raise during your promotion.
First, you back up all the reasons for the promotion from your career achievements journal you’ve been accumulating on your accomplishment metrics. Second, if they balk at an increase, have your manager visualize what it would take if you were no longer in the role, “Let’s look at this from a different viewpoint. What would be the alternative? If you had to pay for someone to do all these responsibilities, what would it be? A person and a half? Recruiting for a new person?”
He cautioned by stating, don’t position in a threatening way. Click here to watch his video on sharing your value in an insightful way to your current employer. Don’t negotiate with “I,” rather how would “you.” It helps an employer focus on how your role is done for them to be successful. If not you, who else?
Employment Contracts
Current executives understand total compensation. How to negotiate them is a different matter. They also sign employment contracts, which are two distinct items to negotiate, according to Kate Dixon. She recommends hiring legal counsel to help you understand your commitment to a company. Is it in your best interest? What happens to your equity when a startup implodes? In the latter case, I have one client who walked away with nothing. That could have been negotiated towards a different outcome.
Bottom Line
When you start a job, you should ask for the annual corporate metric milestones and establish in writing your specific role achievement requirements for your total compensation. Next, I would set monthly and then quarterly performance reviews. It allows your leadership to weigh in and auto-correct as needed. Covid indeed required a roadmap change for companies so that these structured check-ins will keep everyone on track for plot twists. Finally, on your yearly anniversary or after your company’s fiscal year, it’s time to have the annual performance review and discuss the merits of a pay increase.
Here’s to attaining 14%. Can you prove your worth?
