CEO compensation is one of those topics that can turn a normal dinner into a debate club audition. One person says, “CEOs are paid to make hard calls.” Another says, “Sure, but why does the hard call come with a yacht-shaped bonus?” And somewhere in the middle sits the truth: CEO pay isn’t just about fairnessit’s about incentives. If the incentives are wrong, the outcomes get weird. If the incentives are right, you can build companies that compound value for years.

Brian Halligan (HubSpot co-founder and chair) didn’t tiptoe around this in his SaaStr conversation: CEO comp, he argued, is “pretty broken,” and not in a cute “needs a software update” way. Broken like “this system can quietly reward the wrong behavior for a long time.” His critique is especially relevant in SaaS, where growth, retention, product quality, and long-term trust matter more than a single quarter’s fireworks.

Why CEO Pay Is a Big Deal (Even If You Don’t Run a Board Meeting)

Executive compensation is often treated like a private conversation between boards, consultants, and spreadsheets that wear expensive cologne. But the ripple effects are very public:

• Strategy: CEOs chase what the plan pays for.
• Culture: Compensation signals what leadership values (and what it tolerates).
• Risk: Pay design can make leaders reckless… or overly cautious.
• Trust: Employees, customers, and investors notice when pay doesn’t match reality.

In other words: CEO pay isn’t just money. It’s a steering wheel. And sometimes it’s installed backward.

What’s “Broken,” According to Brian Halligan

Halligan’s critique has two big pillarsboth common in public-company compensation design, and both especially visible in modern tech and SaaS.

Problem #1: RSUs Took Overand CEOs Became More Risk-Averse

Halligan points to a major shift: companies moved away from stock options and leaned heavily into RSUs (Restricted Stock Units). RSUs are often described as “options with a $0 strike price,” meaning they can feel closer to guaranteed value once they vest. Halligan’s argument is blunt: when CEO equity feels too guaranteed, it can dampen bold, founder-like risk-taking.

To be clear, this isn’t a love letter to chaos. The goal isn’t “YOLO strategy.” The goal is alignment: if a company needs ambitious, long-horizon decisionsnew products, new markets, big betsthen compensation should reward that kind of performance, not just reward survival.

Halligan’s implication is practical: when compensation is dominated by RSUs, CEOs may rationally prefer “don’t mess up the stock” behavior over “swing for durable advantage” behavior.

Problem #2: Peer Benchmarking Turns CEO Pay Into a Ratchet

The second issue is how compensation committees often set pay: pick a peer group, target a percentile (often the 75th), and prestoyour CEO’s pay has a “market-based” halo. Halligan’s critique: this approach can produce packages that sound big but don’t actually motivate the CEOespecially if the CEO is already extremely wealthy.

He used a pointed comparison: a typical peer-based package might be ~$20M for a CEO at a company like HubSpot at a similar market cap. But for a billionaire-level CEO, $20M may be a rounding error in motivational terms. When incentives don’t move the needle emotionally or economically, they don’t shape behavior. They just… happen.

Halligan suggests boards may need to get creative: instead of anchoring everything to peer benchmarks, consider how to make incentives meaningful relative to the CEO’s net worth and opportunity costwithout turning comp into a casino.

The “Fix” Halligan Likes: PSUs and Real Performance Targets

Halligan liked the idea behind using PSUs (Performance Stock Units) because they can reintroduce performance sensitivity: shares are earned only if specific outcomes happen. Think of PSUs as equity with homework.

But he also highlighted a trap: if PSU triggers are tied to stock price, unusual market events can cause targets to be hit quicklysometimes immediately after an IPO popmaking the “performance” element evaporate. In the SaaStr discussion, the Figma example became a cautionary tale: stock-price triggers can be “achieved” by market enthusiasm rather than operational excellence.

So what works better? Operational targets a CEO can truly influence. Halligan pointed to metrics like net new ARR and an earnings number as examples of more controllable, business-linked measures. In SaaS terms, that’s closer to the engine room than the stock ticker.

Zooming Out: The Data Behind the Debate

Even if you agree with Halligan’s diagnosis, it helps to understand the broader landscape:

CEO Pay Levels Are Highand Often Equity-Driven

Recent analyses have highlighted how stock awards can dominate CEO pay outcomes in strong markets. Median CEO pay figures differ by methodology and sample, but the broad story is consistent: equity and long-term incentives remain the main drivers of “headline” compensation.

The CEO-to-Worker Pay Ratio Is a Lightning Rod

CEO-to-worker pay ratios have become a central talking point for critics of executive pay. Ratios vary by company and industry, but national-level estimates often show a wide gap between CEO realized pay and typical worker compensation.

Regulators Have Pushed for More Disclosure (Not a Pay Cap)

US rules generally focus on transparency and governance rather than hard limits. Over the last decade-plus, policy has moved toward requiring companies to show more of the “why” behind pay decisions, including pay ratio disclosure and pay-versus-performance reporting.

So… Is CEO Compensation Broken?

“Broken” is a strong word. But here’s a fair translation: the default system can be too easy to game, too reliant on peer comparisons, and too weak at rewarding long-term value creation.

Sometimes CEO comp fails because it overpays for mediocre performance. Sometimes it fails because it under-incentivizes extraordinary ambition. Sometimes it fails because it rewards stock price movement that has little to do with leadership quality. And sometimes it fails because it’s designed defensivelyoptimized to avoid shareholder complaints rather than optimized to build a better company.

How to Fix CEO Compensation Without Starting a Class War

Fixing CEO pay isn’t about punishing success. It’s about building a compensation engine that rewards the outcomes shareholders, employees, and customers actually want.

Fix #1: Stop Copy-Pasting Peer Benchmarks

Peer benchmarking can be a reference point, but it should not be the blueprint. Boards can ask:

• What behaviors do we want more of?
• What outcomes matter over 3–5 years?
• How does our business model create value (and how can it destroy it)?
• Is this package meaningfully motivating for this CEO?

Fix #2: Use PSUsBut Tie Them to Operational Reality

PSUs can be powerful if they are tied to metrics that reflect durable value, such as:

• Net new ARR or net revenue retention improvements
• Revenue growth with quality guardrails (e.g., churn thresholds)
• Operating income or free cash flow targets (especially post-scale)
• Customer outcomes (carefully defined, not vibes-based)

If you tie PSUs to stock price alone, you may reward macro tailwinds, market mania, or a single narrative shiftnone of which prove the business got better.

Fix #3: Extend Time Horizons (And Make Holding Real)

Short vesting can create short thinking. A more long-term orientation can include:

• Longer vesting schedules for equity
• Post-vesting holding requirements (so leaders ride outcomes, not just earn them)
• Multi-year performance periods that reduce “one-quarter heroics”

Fix #4: Add Clawbacks and Guardrails That Actually Bite

Clawbacks are a governance tool designed to recover incentive pay in certain restatement scenarios. They work best when they’re clear, enforceable, and not written like a polite suggestion. Guardrails can also include caps, risk controls, and payout curves that avoid massive rewards for narrow outcomes.

Fix #5: Make Pay Understandable to Humans, Not Just Compensation Consultants

If you can’t explain your CEO compensation plan in plain English, it’s probably too complicatedor it’s hiding something. Great pay design should be explainable to:

• shareholders reading the proxy statement,
• employees who want to trust leadership, and
• the CEO who should know exactly what “winning” means.

What About “Say-on-Pay” and Shareholder Votes?

Say-on-pay votes are typically advisory, but they matter. They’re a signaland signals can become storms if boards ignore them long enough. The healthiest pattern is feedback, adjustment, and communication: if investors are consistently concerned, explain the rationale or redesign the plan. Pretending the vote is “just advisory” is like saying a smoke alarm is “just audio.”

A Practical CEO Pay Checklist for SaaS Boards

If you’re a board member, founder, or investor designing CEO compensation, here’s a clean checklist that doesn’t require a PhD in acronyms:

1. Define the mission for the pay plan: growth, profitability, product leadership, durabilitypick your priorities.
2. Choose 2–4 core metrics: include at least one that reflects quality (not just speed).
3. Balance tools: salary (stability), bonus (annual focus), and equity (long-term alignment).
4. Use PSUs thoughtfully: operational triggers > pure stock price triggers.
5. Lengthen horizons: vesting and holding that encourage long-term stewardship.
6. Stress-test scenarios: what happens if the market doubles? what if it crashes? what if growth slows but retention improves?
7. Communicate simply: if it can’t fit on one page, it’s probably doing too much.

Closing Thoughts: Fixing CEO Pay Is Really About Fixing Incentives

CEO compensation isn’t “broken” because CEOs are villains or because capitalism is a comic book. It’s broken when the incentives don’t match the outcomes. Halligan’s point lands because it’s operational: RSUs can reduce risk-taking, peer benchmarking can become a ratchet, and stock-price triggers can accidentally reward hype.

The fix is not one magic pay package. The fix is better design: compensation that rewards long-term value creation, uses metrics the CEO can truly influence, and treats shareholders and employees like intelligent adults.

Real-World Experiences and Lessons (A 500-Word Add-On)

Let’s talk about what this feels like in the real worldbecause “CEO compensation design” sounds like something you do in a conference room with a laser pointer and no joy.

Experience #1: The “We’ll Pay at the 75th Percentile” autopilot. In a lot of boardroom stories shared publicly over the years, the first draft of CEO pay starts with benchmarking. It’s comfortable. It’s defensible. It’s also how you end up paying “above average” foreverbecause everyone’s peers are also trying to be above average. That’s not strategy; that’s a group project where everyone gives themselves an A.

Experience #2: The RSU comfort blanket. Many companies lean on RSUs because they’re easy to explain and can be perceived as “standard.” But standard doesn’t mean optimal. When equity is too guaranteed, a CEO might logically manage for downside protectionavoid ugly surprises, avoid controversial product bets, avoid bold moves that could temporarily upset margins. That can be appropriate for mature companies. It can also quietly stunt a company that needs reinvention.

Experience #3: The PSU trapdoorwhen stock price does the work. PSUs are supposed to be performance-based, but if the trigger is stock price and the market throws a party, the “performance” can show up without the business getting better. That’s how you can “earn” massive equity from timing rather than execution. This doesn’t mean stock price should never matterit means stock-price-only triggers can be a blunt instrument.

Experience #4: The best plans feel boring (and that’s a compliment). The healthiest compensation stories often share one vibe: clarity. Two or three metrics. A multi-year time horizon. A payout curve that doesn’t explode for minor wins. Clear definitions that reduce gamesmanship. The plan doesn’t try to measure 17 things. It measures what matters and trusts leadership to operate.

Experience #5: Incentives shape culture faster than posters do. Companies can hang “Customer First” on every wall, but if leadership pay rewards growth at any cost, everyone learns the real priority. If leadership pay rewards retention and quality alongside growth, teams make different choices: better onboarding, stronger support, fewer “sell it now, fix it later” moments.

Experience #6: Great CEO comp design evolves with the company’s phase. Early-stage SaaS might emphasize product-market fit and growth. Later-stage might emphasize profitable growth, durability, and efficiency. A good board revisits the plan as the company matureswithout overreacting to one bad quarter or one great headline.

The takeaway from these “lived-in” scenarios is simple: CEO compensation isn’t just a number. It’s a management system. If you design it carefully, it can encourage courage, discipline, and long-term thinking. If you design it lazily, it can reward caution, optics, and short-term wins that age badly.