Exec Comp Data & Why Execs Get Fired

What executives get paid (cash and equity), how long they stay, and why they leave

Sep 22, 2024

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Executive Compensation

Many folks have dreams of climbing to the top of the career ladder — becoming an executive, getting paid lots of cash, and receiving a huge pay day when the company IPOs.

Compensation comes in two forms:

Cash: Base salary + bonus/commissions
Equity: Stock options, RSUs, etc

Cash is pretty self-explanatory, but make sure you understand how attainable the bonus/commission piece is. Some plans are much more attainable than others.

Equity is where the big differences are between executives and everyone else. It’s where executives can make A LOT of money if they choose the right company (but that is a BIG if). At public companies, equity is basically cash, but at private companies there usually has to be some kind of positive exit for employees to get their payday.

Cash Compensation

Below is the total cash compensation for execs and VPs at companies that raised between $20M and $100M.

CROs are at the very top - as long as they are meeting targets then they are making a lot of money.
CFO are pretty close to the top as well.
There is going to be a wide range of company sizes on this list so it’s not perfect but gives a good overall direction. Some VPs/SVPs in the data are probably “Heads of” (reporting to the CEO) as well so that likely creates some pay differences.

Now let’s dive into the CFO role in a bit more detail. As you would expect, CFO compensation increases significantly as a company scales. This usually isn’t just that CFOs get paid a lot more at scale (although that is partially true for every role), but rather the CFO needed at a company that has raised $500m is generally much different than one that has raised $10m - companies need someone with public company/IPO experience, someone with deep industry experience, a higher level of strategic expertise, etc.

CFOs (heads of finance) between these stages get topped (someone hired above) all the time. The company numbers start to matter a lot more as a company scales and CEOs don’t want to risk having the wrong person.

Equity Compensation

Public company equity is almost like cash because as soon as it vests you can sell it. The one caveat is that almost everyone has a one year cliff before anything vests. So just don’t get fired before then.

Private company equity is different. In 2021, most people believed that their equity would be worth something at some point given all the IPOs and M&A at that time. Employees value cash a lot more today (and equity a bit less…)

Like I mentioned earlier, many of the VP/SVPs in the data are probably “Heads of” (report to the CEO) which means they would get more equity so that may skew the data a bit.

Executive Tenure

Executive turnover can vary quite significantly depending on the role. Executives leave companies for a variety of reasons (more on that later), but when they do leave it can be very disruptive to the company.

Below is another view of the data based on company stage.

To account for the bias of only including tenure of in seat execs, below is based on annual executive retention rate. The below chart looks at execs that were in seat one year ago, and calculates the % that are still at the company.

CRO is a high risk, high reward game. They have the highest compensation, but lowest average tenure.
CFOs are on the higher end of comp and somewhat in the middle for tenure. One of my more recent observations is that the average tenure of CFOs seems to be decreasing.

Why CFOs (or other execs) Get Fired

There are two typical ways employees (including execs) leave a company:

Voluntarily - put in your notice and go do something else
Involuntarily - fired for some reason

A third common approach for execs is an involuntary termination that is packaged up to look like a voluntary termination to save face for the exec and allow the exec to ease fears and create a smooth transition. This happens a lot more than most folks realize.

Below are a few reasons why execs leave a company:

Why execs get fired:

Someone more powerful/influential doesn’t like you
If the CRO doesn’t like the CMO and something isn’t working, then the CMO is probably getting fired first. CROs are better at selling and are typically closer to the CEO.
Exec doesn’t level up with the company
What got us here might not take us to the next level. As a company scales, people often don’t scale with it so the company needs to fire or top (hire someone higher) that person.
Exec’s org isn’t hitting metrics or objectives
Every Exec has metrics and objectives they must hit. If they aren’t meeting these requirements then eventually they will be fired. The CFO’s team must pass audits, be fairly accurate in forecasting, keep spend under control, etc.

Why execs leave:

The “voluntary” termination is a facade
Exec is being pushed out but the company dresses it up as voluntary to cause less anxiety for the company…
Jumping a sinking ship
Exec sees the writing on the wall and jumps ship before getting forced out. Exec has access to conversations and information that others don’t have. This is especially true for CFOs who are reviewing all finance info.
Leaving before they get fired for one of the previously mentioned reasons
Some people will run before they get fired.
Found a better opportunity
Sometimes they do find better opportunities (more cash + more equity upside) at a company with more potential.
They are bored and want to do something else
This is quite common. Maybe they have made a lot of money already and want to optimize for other things (work/life, try startups, passionate about a particular industry, etc)
Made so much money (or old) so they are retiring.
This is the reason that should give the least amount of anxiety for the people who stay :)

Why do CFOs get fired?

In addition to the general reasons mentioned above, I see the below three things as some of the most common reasons that CFOs struggle:

Being a “No CFO” vs a driver of growth: A CFO’s job is to balance growth and efficiency (relevant post from my friends at Brex) to drive long-term shareholder value. Yes, you can temporarily save money by cutting costs and not trying anything new, but it will come at a great cost — the long-term success of the company. Great CFOs figure out how to also be revenue growth drivers. They don’t just control costs.
Not knowing the business inside and out. This is why many Controllers fail as CFOs. They know the numbers but they don’t actually understand the business, the industry, the competition, how to grow the business, etc. The more data you have, the higher the expectations.
Slow adoption of technology. CFOs need to help drive the change that creates the highest efficiency possible with AI. Stop using numbers based on spend benchmarks 12 months ago. CFOs need to encourage/force adoption of AI and quickly hold their company to a higher level of efficiency…because if they don’t the competition will.

Footnotes:

“The CFO Playbook” from Brex (today’s sponsor) tells you how to meet and exceed the lofty expectations for today’s finance leaders.
Reply to this email if you need a fractional CFO and/or bookkeeping for your company. I partner with a great group.
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