CEO Salary
CEO salary is a unique case within a company. Whereas every other role has the concept of levels, progression and seniority, there isn't really the concept of a junior or senior CEO, or a level 6, 8 or 10 CEO. Of course, CEOs grow and learn over time and become more experienced, however those learnings should generally translate into company growth that can lead to salary increases, rather than choosing to increase the salary separately. The idea that a CEO does not have levels or seniority is corroborated by our Market Data source, Carta.
When Approaching Salaries from First Principles, the conclusion is that CEO pay should be very closely aligned with the success of the company and the positive impact results have on customers and the team. If the CEO is successful in their role, then the company will grow and it will have the ability to pay higher salaries across the board.
It’s also vital that CEO pay is transparent, since in many companies this is not the case and is a key source of distrust. CEOs are often excessively overpaid and the gap between lowest and highest salary in companies can be extreme. This is one of the reasons Why Salaries are Transparent at Buffer.
CEO salary formula
At Buffer, we’ve embraced the concept that the CEO salary should be primarily tied to the performance of the company. The formula for CEO salary is simpler than other roles due to the lack of levels. Therefore, CEO salary is calculated as follows:
CEO benchmark * Cost of Living (90%)
CEO salary increases are tied to other salary increases
Without levels, how can CEO salary change? Put simply, the CEO salary at Buffer can only go up based on the following things changing:
- The percentile chosen for CEO salary
- The benchmark increasing for CEO salary
- The location factor (see Future Iterations)
- The company size (see Market Data)
It’s important to note that the way we have designed our Salary System, these genuinely are the only ways that the CEO salary can grow. Each of these scenarios is aligned with our philosophy that A rising tide lifts all boats (salaries).
Percentiles: Since our goal is generally to align percentiles over time, the only real way to increase the percentile for the CEO salary will be to increase percentiles across the team, resulting in other salaries also increasing.
Benchmark Increase: If the market data indicates that the benchmark for CEO salaries has increased, then CEO salary would increase accordingly when we perform our regular Rebenchmarking. If this occurs, it is almost certain that many salaries in other roles would also be increasing at the same time.
Location factor: Similarly, when we reach a point where we are able to eliminate the location factor, since CEO salary is currently in a 90% location (Boulder, Colorado), there would be an increase to CEO salary that is tied to many other salaries also increasing in the team.
Company Size: We are currently using benchmarks from data that matches our company size ($10-25M). When we reach the new tier ($25-50M), all salaries in the company will increase, including CEO salary.