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How to Determine Compensation

How to Determine Compensation

This question is taken from AGB Search‘s monthly newsletter, “Securing Leadership,” which features two questions — one frequently asked by search committee members and another often posed by candidates. You can subscribe to the newsletter here.

I'm a finalist in a presidential search. How will the institution be determining what to offer by way of compensation? By this point, the search consultant should have informed you of a general range and he or she should have spoken with you about your salary history and expectations. These will be taken into account if you are the candidate selected. Those who fashion the particular offer – often a board compensation committee or executive committee – will need to take many variables into account.

To follow best practice – and minimize the chances of IRS scrutiny in an area in which board members can find themselves individually liable – they should follow a process which the IRS refers to as “establishing a rebuttable presumption of reasonableness.”

This infelicitous phrase means, among other things, identifying appropriate peer institutions and securing reliable benchmark information on the types and amounts of compensation they provide their chief executives. The institution also needs to ask itself a set of contextual questions – about the selected candidate, the position and the institution – to calibrate its offer still more carefully. Third-party compensation consultants like the Compensation Evaluation Service offered by AGB Search and CUPA-HR can provide assistance. You should have the opportunity to negotiate, with or without legal counsel, the amount and types of compensation. Ultimately, the goal should be remuneration that is both competitive and fair.

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