The uncomfortable truth about how we’re paying CEOs at the best tech companies wrong— and why it’s creating the wrong incentives for growth.
A Candid Conversation with Brian Halligan Chair and Co-Founder of HubSpot on CEO Comp Reality
We sat down on 20VC + SaaStr podcast with HubSpot co-founder and former CEO Brian Halligan for an unfiltered discussion about CEO compensation. What emerged was a masterclass in why our current approach is fundamentally broken — and what forward-thinking companies are doing differently.
“CEO comp is pretty broken at the moment,” Halligan said bluntly. “And there’s two things that I think are pretty broken about it.”
The conversation revealed insights that most compensation committees would rather not discuss publicly. But for companies serious about aligning leadership incentives with exponential growth, these uncomfortable truths are essential.
The $20 Million Problem That Doesn’t Matter
Here’s a thought experiment that’ll make your head spin: What if paying your CEO $20 million a year is actually… meaningless?
That’s the reality facing compensation committees today, especially when dealing with founder-CEOs who’ve already built significant wealth. Take Dylan Field at Figma — if you benchmarked his compensation against peers at similar market cap companies, he’d earn around $20 million annually. But here’s the kicker: that represents just 3% of his personal net worth. It literally doesn’t move the needle.
The core issue? We’re using outdated frameworks to solve modern compensation challenges.
The Two Fundamental Breaks in CEO Compensation
After analyzing hundreds of compensation packages across SaaS and tech companies, two critical problems emerge:
Break #1: The RSU Addiction That’s Killing Risk-Taking
The Old Days vs. Today:
- Pre-2006: CEO packages heavily weighted toward Incentive Stock Options (ISOs)
- Post-2006: Regulatory changes pushed companies toward Restricted Stock Units (RSUs)
“Everyone really relies heavily on RSUs,” Halligan explained. “And when I grew up in the industry — I hate to be that guy, like back in the old days — it was mostly ISOs. It was options until 2006 and regulations changed and the expensing of that changed. So the world kind of moved to RSUs.”
Why this matters: RSUs are essentially guaranteed money — they’re like options with a zero strike price. You get them regardless of performance (as long as you stay employed). This creates fundamentally risk-averse behavior.
“It just creates sort of a risk averse behavior in the CEO,” Halligan noted. “Like it’s basically cash comp goes up and down a little bit, let’s say, but an ISO you’re swinging for the fences like you got a strong incentive to swing and so it’s really had a dampening effect on the risk-seeking behavior of a CEO that I think more companies should want.”
The psychological impact is massive. ISOs forced CEOs to think like founders — your equity is only worth something if you create massive value. RSUs let CEOs think like employees — you get paid for showing up.
Break #2: The Peer Benchmarking Trap
Here’s how compensation committees typically work:
- Identify 15-20 “peer” companies of similar size/stage
- Target paying CEO at 75th percentile of peer group
- Set compensation accordingly
- Pat themselves on the back for being “market competitive”
Halligan walked us through the reality: “HubSpot’s got a compensation committee. Everyone’s got a compensation committee. And HubSpot wants to pay the CEO, let’s say, at the 75th percentile of what her peers make. And so we look at 20 different peers of similar size companies… And we peg her at that 75th percentile, which in her case is, you know, it’s 20 million bucks. A lot of money.”
The fatal flaw: This system assumes all CEOs have the same financial motivation profile.
“Now, if you did that for Dylan [Field], which would be in our comp group, similar market cap to HubSpot, he’d make 20 million bucks a year. But if you think about it, that’s less. That’s like 3% of Dylan’s market cap of his own personal net worth. It doesn’t move the needle an iota. It doesn’t matter at all to him.”
The Dylan Field Case Study: Getting Creative with Compensation
Figma’s approach to Dylan’s compensation package offers a fascinating glimpse into next-generation CEO comp design:
What they did differently:
- Heavy use of Performance Stock Units (PSUs) instead of traditional RSUs
- Compensation sized relative to CEO’s net worth, not just peer benchmarks
- Created a “$2 billion moonshot” structure (Elon Musk-style ambitious targets)
“And so, you have to get kind of creative,” Halligan observed. “And so, I actually like what they did with his comp. They use PSUs very heavily, not RSUs. And I like the idea of not pegging your comp to your peers, but you kind of have to peg the comp to the net worth.”
PSUs vs. RSUs — The Critical Difference:
RSU thinking: “Here are 10,000 shares, you get them no matter what”
PSU thinking: “Here are 10,000 shares, but you only get them if the stock hits $40”
PSUs effectively recreate the option-like incentives that got regulated away in 2006. You’re only rewarded if you create real value.
The Elon Precedent: When Traditional Benchmarking Breaks Down
Consider this absurdity: Mary Barra (GM’s CEO) makes $29 million annually. If you paid Elon Musk the same amount, would he care? Would it change his behavior or decision-making in any meaningful way?
Halligan put it perfectly: “Same thing with Elon Musk. Like if you paid Elon Musk, like Mary Barra, Mary Barra makes $29 million a year. Do you think Elon cares about $29 million? So you have to kind of comp it to the CEO’s net worth as opposed to just the peers.”
The answer is obviously no.
This illustrates why peer benchmarking fails for ultra-high-net-worth founder-CEOs. The compensation has to be scaled to their wealth level to create meaningful behavioral incentives.
Why Stock Price Triggers Often Don’t Work
Here’s where even innovative approaches can fail: Many PSU packages use stock price as the performance trigger. Sounds logical, right?
The trap: If you set these triggers before an IPO during a bull market, you might accidentally set targets that get achieved immediately post-IPO, negating the incentive effect entirely.
Real example: Dylan’s compensation triggers were reportedly achieved shortly after implementation, essentially converting the PSUs back into guaranteed RSUs.
The Broader Strategic Implications
This isn’t just about fairness or optics — it’s about optimizing for the behaviors that drive exponential growth:
Risk-seeking vs. Risk-averse CEOs:
- ISO-heavy packages = More likely to pursue bold product bets, aggressive expansion, transformative M&A
- RSU-heavy packages = More likely to optimize for steady, predictable growth
For B2B and SaaS companies specifically:
- The difference between 25% and 40% annual growth often comes down to CEO risk tolerance
- Compensation structures directly influence willingness to invest in unproven channels, new markets, or breakthrough product development
A Framework for Better CEO Compensation
Based on these insights, here’s a more effective approach:
Step 1: Assess CEO Financial Context
- Current net worth and liquidity
- Wealth concentration (how much is tied to company stock)
- Personal financial obligations and lifestyle
Step 2: Design Incentives That Actually Incentivize
- Use PSUs with meaningful performance hurdles, not RSUs
- Set triggers based on business fundamentals, not just stock price
- Size compensation relative to CEO’s wealth, not just peer benchmarks
Step 3: Align Timeframes with Value Creation
- Multi-year performance periods for long-term thinking
- Clawback provisions for unsustainable short-term gains
- Vesting schedules that reward sustained performance
Real-World Case Studies: How Top B2B and SaaS Companies Are Solving CEO Compensation
The theory is one thing, but how are leading public companies actually designing compensation packages today? Here’s what our research uncovered:
The Salesforce Shareholder Revolt: When $39.6M Isn’t Enough
Marc Benioff’s 2024 compensation package of $39.6 million was rejected by shareholders in a rare display of compensation skepticism. Despite board recommendations, 53% of shareholders voted against the plan, largely due to concerns over a discretionary $20 million equity grant awarded in January.
What made this interesting: Benioff already owns over 2% of Salesforce (valued at $6 billion), yet advisory firms like Glass Lewis argued the additional PSUs were “unwarranted” because his interests were already aligned with shareholders.
This perfectly illustrates Halligan’s point about compensation needing to be sized relative to CEO net worth, not just peer benchmarks.
ServiceNow: The $38M “Moonshot” Structure
ServiceNow CEO Bill McDermott received $37.56 million in 2024 total compensation, with the vast majority ($31.46M) coming from stock awards. But the structure is what’s fascinating:
The Innovation: Heavy use of PSUs tied to long-term performance metrics rather than just stock price triggers. McDermott’s package reflects his track record of taking three companies through successful exits and massive value creation.
The compensation represents a premium to industry median ($17M for similar-sized software companies) but is justified by ServiceNow’s 149% three-year shareholder return and consistent 20%+ revenue growth.
Snowflake: The $108M Monthly Payout Model
Perhaps the most extreme example of creative CEO compensation was Frank Slootman’s Snowflake package, which awarded him options worth more than $108 million each month for four years, totaling approximately $5.2 billion by early 2023.
The Structure:
- 13.7 million options with $8.88 strike price
- Monthly vesting over four years
- $375,000 base salary (minimal compared to equity upside)
The Results: Slootman took Snowflake from a $3.5 billion private valuation to nearly $110 billion at peak, justifying the enormous equity package through value creation.
Workday: The Leadership Transition Model
Carl Eschenbach became sole CEO of Workday in February 2024 after serving as co-CEO, representing an interesting approach to succession planning and compensation design.
The Approach: Rather than traditional benchmarking, Workday appears to be designing compensation around leadership transitions and AI-focused growth strategies, with Eschenbach’s background in scaling enterprise software companies.
MongoDB: The Performance-Driven Minimalist
Dev Ittycheria’s 2024 compensation of approximately $15.3 million consisted of just a $400,000 base salary (3.2% of total) with the remaining 96.8% in performance-based equity.
The Philosophy: MongoDB emphasizes pay-for-performance alignment, with annual bonuses based on corporate performance goals and a maximum payout of 150% of target for exceptional results.
This represents the extreme end of the “skin in the game” philosophy, with minimal cash compensation and maximum equity alignment.
Three Emerging Patterns in Modern CEO Compensation
From these real-world examples, three clear trends emerge:
1. The “Shareholder Skepticism” Factor
Traditional peer benchmarking is increasingly questioned by shareholders and advisory firms. Companies can no longer assume that “market competitive” packages will be approved without scrutiny.
2. The “Value Creation Multiple” Approach
The most successful packages tie compensation directly to measurable value creation rather than tenure or traditional metrics. Slootman’s monthly option grants and McDermott’s performance-based structure both reward executives for genuine business building.
3. The “Founder Economics” Challenge
For founder-CEOs with substantial existing wealth, traditional compensation approaches become meaningless. The industry is still experimenting with how to create meaningful incentives for executives who are already worth hundreds of millions or billions.
The Verdict: Evolution, Not Revolution
The data reveals that CEO compensation isn’t broken in the way most people think. It’s not about amounts being too high or too low—it’s about the industry slowly evolving from outdated frameworks toward more sophisticated alignment mechanisms.
The companies getting this right are the ones asking better questions: “What behaviors do we want to incentivize?” rather than “What do our peers pay?” and “How do we create meaningful upside for someone who’s already wealthy?” rather than “How do we hit the 75th percentile?”
The Path Forward
For compensation committees: Stop defaulting to peer benchmarking as your primary framework. Start with the question: “What compensation structure will drive the behaviors we need to achieve our strategic goals?”
For founder-CEOs: Be transparent with your board about what actually motivates you. A $10 million package that drives the right behaviors is better than a $30 million package that doesn’t.
For investors: Pay attention to compensation design, not just compensation amounts. It’s a leading indicator of management’s risk tolerance and growth ambitions.
The Bottom Line
CEO compensation isn’t broken because we’re paying too much or too little — it’s broken because we’re not paying for the right things in the right way.
The future belongs to companies that master this evolution. The rest will continue optimizing for mediocrity while wondering why their “competitive” packages aren’t driving competitive results.
