1 - Striking the deal

Summary

The starting point: getting to the ‘number’ which represents the executive remuneration package

This chapter identifies the steps that must be taken when hiring an executive. In doing this, it is helpful to look at the deal as a process which leads to a single monetary amount (the ‘number’).

The number is the value of the final package that employer and candidate both sign up to. It is an abstract concept. It represents what an informed and independent observer would consider the value of the package to be, taking into account what will be paid, when it will paid and the likelihood that it will be paid.

In reality, the employer and the candidate may have different numbers in mind. For example, they may have different views on how likely it is that a particular part of the remuneration package will actually be paid. In practice this means that the number will always be, for practical purposes, a range, reflecting the different values that could be assigned to the package's individual components. But for purposes of explanation, and negotiation, the idea that both candidate and employer are effectively engaged in a process of convergence on a shared idea of the value of the package is a useful tool. It is the best representation of both the value of the deal to the individual and its cost to the company and its shareholders.