What income should CEOs make compared to the income of their employees?
My rough rules are:
- In the very early days, the CEO should be one of the worst paid. Until you have material revenues and/or funding, the CEO should ideally only take out the minimum she needs.
- Post-Initial Traction, and the hiring of a VP or Two — the CEO should probably be the 3d best paid. Hopefully, your VP of Sales is doing so well, she makes the most — not in base salary, but in salary + bonus. Then, hopefully, you’ve hired another Great VP that is so terrific she makes more than you, too. CEO as 3d is nice to see here. It’s the right stack ranking from say $1m to $10m in revenues, roughly.
- Later, when money doesn’t matter so much, the CEO should be paid enough not to worry. This can be tough in high cost markets like SF, but after $10m in ARR or so, it doesn’t really matter. The last thing I want is the CEO stressed about paying rent, schools, etc. You want equity to be the main driver here, but once cash isn’t that important (the company is cash-flow positive or you’ve had a large raise and have many years of runway), the #1 use of that cash is to de-stress the CEO’s life.
But … your gut probably already told you all of this already 🙂
Published on December 22, 2017