- Industry has a significant impact on compensation in addition to company revenue.
- Diminishing returns are observed when looking at compensation versus company size.
- Higher or lower entry salaries are more likely to be placed than "middle-of-the-road" candidates.
Many executives assume that the larger the company, the greater the compensation for those in the C-suite. There are several reasons behind this assumption, and some broad studies have given it credence.
Bigger companies usually have a larger hierarchical structure, more stakeholders to deal with, and more employees to manage and consider. Larger companies are also equipped with the resources to better fund their executives, meaning those executives have to bear a greater financial responsibility. Many companies also link C-suite compensation directly to overall company performance, incentivizing executives to drive harder for success. More monetary resources means a larger pool of funding to provide those incentives.
A 2018 study from Chief Executive Research of 1,631 privately-owned companies showed stark differences in company size versus compensation. The average total compensation for a private CEO in 2017 was $2,213,679, over six times the median value of overall CEO compensation. Median salary, including not just salary but bonus, equity, and other benefits, totaled $350,622. The same study found a significant correlation between both revenue and the number of employees with larger overall compensation. According to the study, one reason for this disparity is that the greater the complexity of an organization, the higher the pay.
Additionally, competition with publicly-owned companies for executive talent may make private equity firms increase compensation in order to attract the best, most highly-qualified executives. These PE packages tend to