The Advisors' Blog

Interim CEOs — the folks who step up to lead a company when it loses its CEO without an immediate successor — have a hard job. And this is a group of folks I don’t often see a lot of compensation data about. It’s always seemed like compensation packages for interim CEOs ran the gamut. But this WTW article breaks down the patterns of interim CEO compensation. Not surprisingly, the pay package for the role depends greatly on the background of the folks taking it on. The article separately analyzes pay for interim CEOs that come from the company’s executive officers and pay for interim CEOs who were previously non-executive directors.

When a company finds itself without a CEO, 55% select a named executive officer (NEO). Prior to being named interim CEO, more than one-third of these NEOs held the position of CFO. … Compared with pay of the former CEO, 77% of named interim CEOs earned at median:

• 53% of the total direct compensation
• 82% of salary
• 37% of long-term incentives (LTIs)

The other 23% did not receive additional compensation for their temporary service; however, 80% served in the interim CEO role for 3 months or fewer.

When executive candidates are unavailable or not ready to take the helm even temporarily, it is common to appoint an interim CEO from the company’s board of directors. … Of directors who were appointed interim CEO, 38% were the non-executive board chair.

Moving from the board to an interim executive position includes a new title and new compensation. Pay for a non-employee director serving as interim CEO switches from typical board pay – generally comprising cash and equity retainers – to compensation that more closely mirrors that of the executive team.

Among directors serving as interim CEO, 88% received compensation in recognition for their service. At the median, directors serving as interim CEO received $1.3 million cash compensation (cash plus bonus).

In several cases, director interim CEOs received higher fixed pay compared with the outgoing CEO’s pay, to offset limited participation in incentive programs (e.g., just 29% of directors participated in the company’s annual incentive plan). However, 22% received a special bonus; these were provided for either signing-on to serve as interim CEO or for the successful completion of the interim service. The median value for this special bonus was $500,000.

In addition to cash compensation, directors received $1.5 million in stock-based compensation at the median. Ninety-one percent of stock compensation received was in the form of restricted stock/restricted stock units (RSUs), most commonly cliff-vesting after one year. While restricted stock/RSUs were the most prevalent vehicle, 20% of interim CEOs were granted stock options and another 14% were granted performance-based LTIs.

Companies may also recruit from outside to fill the role of interim CEO, but the article doesn’t analyze pay for this group since they are typically selected because the company may be experiencing a shock event or turnaround situation.

– Meredith Ervine