With a tight supply-and-demand situation favoring executives inclined to switch jobs, the average compensation increase for those who did so in 2019 shot up by 28% from the prior year, according to new research.

In 2018, the average pay hike for job-switching C-suite and VP-level executives was 11.42%, based on compensation data related to several dozen placements in 2019 by executive search firm Salveson Stetson Group. Last year, that figure climbed to 14.64%.

The study took into account executives’ base salary and bonus but not equity awards.

“Continued upward pressure on executive compensation is to be expected given the tightness of the labor market,” said Sally Stetson, a Salveson Stetson principal and leader of the firm’s human resources practice, in a press release.

Still, the premium commanded by executives upon switching employers has, overall, been significantly less in the past few years than it was from 2011 to 2016, when increases trended toward 20%.

The pullback could be the result of a combination of factors, suggests John Touey, leader of Salveson Stetson’s financial officer practice. For one, companies may be thinking, “How high can we go? Have we reached a ceiling for the premium that top talent can command at this point?”

“Have we reached a ceiling for the premium that top talent can command at this point?”

Concern about high executive pay also could be traced to expectations for a slowing economy, as well as pushback from investors over rising executive compensation levels.

But inflexibility on compensation, combined with the supply-and-demand ratio for executives, does mean that some companies might not get exactly what they’re looking for in talent searches, Touey notes.

“Either a company may have to settle for A-minus or B-plus talent rather than A talent, or the search may last longer than it would if the company had more financial leverage,” he says.

At the same time, Touey stresses, in many cases executives aren’t necessarily looking to maximize their compensation.

“A company that’s not competitive from a pay standpoint will not be able to compete for the best talent — that is, unless there is something else compelling about the organization,” he says.

Often, what’s compelling is idiosyncratic to individual candidates — for example, a certain desired location or industry, or an opportunity to broaden skill sets they can’t acquire at their current employer.

“A smart candidate will put a price tag on that,” says Touey. “If they can get X, they’re willing to give up some portion of salary.”

Career development opportunities, flexibility on working arrangements, and a reputation as an employer of choice can also lessen the need for a company to be in the top quartile or higher in base pay and bonus.

“If the data shows us anything, it’s that someone is always willing to pay more for talent,” Touey says. “A company that’s competing for people solely on compensation is most likely in a losing position. There must be other anchors beyond compensation to engender stickiness with the executive population.”

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