🐟 CEO's Dilemma: Innovation without Compensation?

Senior leaders in traditional, often corporate organisations face a tough paradox. They are expected to drive new ventures, big transformations, and realize aggressive growth, yet remain bound to outdated compensation structures that fail to reward the risk and innovation required. While these leaders spearhead high-stakes initiatives, their compensation—typically tied to corporate-wide performance, stock options, and annual bonuses—often fails to reflect the EBITDA growth they generate.

Meanwhile, leaders in venture-backed startups are incentivized with interesting equity, performance bonuses, and stock options, directly aligning their financial success with company growth and might even acquire a big sum of money when the company is sold. As a result, their risk-taking and entrepreneurial drive are (most of the time) properly rewarded. 

In contrast, senior leaders in traditional companies are often left with limited financial upside, creating a sense of misalignment. This compensation gap leads to frustration and irritation, with top talent leaving corporate organisations for startups and scale-ups where they can better align their success with rewards. Traditional companies are stuck in a catch-22: to innovate, they need senior leaders with entrepreneurial spirit, but without proper incentives, these leaders are less likely to stay or succeed.

For traditional corporations to stay competitive, they must rethink their compensation models for employees who bring in new successes.. Senior leaders driving innovation need compensation packages—equity, performance-linked bonuses—that align with their responsibilities, entrepreneurial spirit and risk appetite. Only then will they truly be motivated to take the risks that are crucial to growth and show commitment for a longer time.