Signium International

The answer is yes, but with subtle differences depending on each case. As I already explained in my previous post, “Executives’ salaries: justified or exorbitant?”, a trend perceived some years ago was the increase in financial executives’ fixed salaries. This increase was an attempt to balance the final compensations received by these directors in relation with previous successful and much wealthier years. The real value of the bonuses received annually by these executives, and which depend on the results and benefits obtained each year by the company’s performance, is what mainly has suffered depletion due to the crisis. In any case, what has not happened, at least in general terms, is the continual increase of these salaries.

And “do the executives accept this?”. A friend of mine asked me this question one day while we had a coffee and so we discussed this matter in detail. “It depends…”, I told him. In presence of this widespread managers’ salaries stagnation, as a headhunter I have noticed three very different situations: those professionals who are comfortable with their current position; others who, even though are currently employed, are open to changes of their current job positions; and, finally, a group of executives who remain unemployed. What happens with the first of these groups of executives, those who are not looking for a change because they are satisfied with their position, is that they leave us, executive search professionals, with less ways to approach them. In these cases, the principal motivation for a change is normally the proposal of a lucrative economical offer in comparison with their current conditions. Thus, without an offer, the motivation for a change simply does not exist. Obviously, the project is very important, though given the market’s uncertainty, this type of candidates usually demand a number of benefits (golden parachute, seniority, redundancy clauses, etc.) which are not being offered. Consequently and as a result, one always ends up discussing about money.

At a midpoint is the second group of professionals: those executives who are not comfortable in their current projects, or those who believe that they cannot grow or that they have already reached the ceiling in their professional opportunities within their current workplace. In this case, a partial conformism exists. In other words, it is possible that these professionals would not accept a change for a salary lower than their existing one; however they are normally open to change when the offered salary is more or less equal to their current retribution, as long as behind this offer they also find a development project or perspectives for change or improvement which could lead this executive to be recognized as a leader in the new company.

Finally, we have those unemployed executives, definitely the professional niche where we have noticed the highest conformism. Honestly, I have found cases of professionals who have accepted positions which I never imagined they would accept. These executives are normally willing to earn a lower salary in exchange for returning to the labor market. And, unless the project undertaken represents a very stimulating challenge for the professional, what usually follows is that once the market recovers, this professional will abandon the project. And the market will recover, because it already begun to do so. Therefore, this situation is as it’s often said: “short-term gain, long-term pain”.

As I said, in the financial sector microcosm (the one I know the best), things have started to change in this sense. For some time now, in Signium International Spain we have started to notice how more and more firms are hiring executives. Thus, it can be said that a true desire and need for hiring new professionals exists. Always think positive, never negatively, as a certain soccer coach used to say.ç

To answer this question without fear of making a mistake it is necessary (even before thinking about answering this question) to begin with the establishment of guidelines which would determine and appraise what is and what is not exorbitant regarding executive salaries. In my opinion, there is no doubt that the first measuring stick to evaluate an executive in this regard should be the value that he or she provides to the company. The equation is clear: as long as the value provided by the executive is higher than the salary perceived, the retributions received by these directors are justified by the company, even if they seem exorbitant to public opinion.

Following this train of though, I cannot stop asking myself why people continue to be surprised and annoyed by the fact that great company heads, such as Alfredo Sáenz, Banco Santander’s CEO, for example, earn 9,2 million Euros a year; yet accept with pride that sportsmen, such as Cristiano Ronaldo, receive almost the same amount per year. After all, Sáenz, the highest paid executive in Spain, was also responsible for Banco Santander’s 2010 result of 8,943 million Euros, the highest of all Spanish banks, and one of the top on an international level. Isn’t this enough justification? Back to the subject of the proposed guidelines: On the basis of what should the value of Cristiano Ronaldo be perceived? Advertising income? Goals scored? I am sure that, unlike the opinion of many Real Madrid fans (and, as a matter of fact, I am a fan of this team), these achievements are not more justified than those reached by the afore mentioned banking executive. I even think the opposite. And I maintain this opinion, despite all the condemning voices which continue to rise against the high retributions earned by these investment bankers, who have featured cases such as “Madoff” or “Lehman Brothers” as if these salaries were the only sources of all the damage produced in these cases. I only wish for an easier explanation.

In general terms, I believe that the fairest executive compensation policy (please note that because of my professional specialization I always write with the financial sector in mind) should include a fixed salary in accordance with the current market conditions, aligned with the amount received by homologous professionals, and a variable salary, related to the achievement of the company goals. Depending on the performance of each professional within the company, this added value would equate to: fringe benefits, international growth, team development, expense reductions, etc. Anyhow, beyond these variables, the most important fact is that a significant part of an executive’s total compensation should be linked to objectives agreed by the company.

In this sense, a regulation of the variable salary has developed over the last years in the financial sector, to some extent due to the following of the established European norm. The bonus received each fiscal year by an executive of the finance sector is normally divided in: one third in cash, another third in company shares paid over three years, and a final third which would be paid in five years. Due to the preservation of this way of payment, the real value of these bonuses is currently lower than in previous years. The other trend in the sector has been to increase the fixed salary in order to decrease the gap; that is, the difference, between the total compensations received previously and at the present time. What is the common reaction of these executives given the evidence of this salary stagnancy or decrease which is inherent in these times of economical crisis? That question deserves to be answered in the extent of an entire post, specifically, the next one.

I thought best to begin this article by including the term “high-level executives” to underline, from the first line, that the vision as well as the experiences that I mean to reflect in this post are based on my knowledge and experience with this specific group of professionals.  In fact, in other more junior levels of the labor market, the importance of one’s digital identity functions differently from how it does for those more senior positions.  As a starting point, it’s important to keep in mind that the current generation of high-level executives that have established their careers in Spain, unlike the case in other countries, have not cultivated their careers with the Internet.  This means that the large majority of this group have not used internet for professional reasons o they have done so in few occasions.

From my point of view as a headhunter, one’s professional digital identity usually plays a key role in the beginning most stages of the recruiting process.  Without a doubt, Internet has become a very useful information channel for us.  And more so in the initial investigation phase, in which once we’ve mapped potential candidates, we try to collect the maximum amount of information possible about them.  The more positive or neutral information available online, higher are the chances of contacting that candidate when compared to one about which we have no information.  Clearly not all information sources we use carry the same weight.  Thus, for example, professional references we trust will always be more reliable and relevant (and sometimes sufficient) than all the information we might find about said individual online.  As is often said “soft wax will take any impression” and the Internet says many things that are not the whole truth.  However, this does not mean that one should not look over what’s said about him or her on the Internet, and although while it is true that in the five years that I’ve been in this profession no candidate has ever been discarded from a search for this reason, it is possible that this situation changes and the online reputation of a person become a “killer question”.

In what online spaces and to what end should a candidate be present to favor his or her “digital identity?  After discarding firsthand for the case of high-level executives those spaces referred to as “social networks”, where we would never go looking, being present on professional networks such as LinkedIn and Xing could be useful.  I say “could” because for this presence to be truly beneficial and not counterproductive, one must keep in mind the kind of professional information that we share (a overly detailed résumé might seem as if one is “actively looking”), take care that it’s up-to-date and above all have a clear idea of what we hope to gain from being there.  From my own experience, my opinion is that for more senior professionals the only end sought on these networks should be professional networking.  That is to say, expand one’s network of personal and professional contacts and not only turn no them for commercial motives.  For those executives looking for a change, I recommend that they always begin more discreetly, for example through a headhunter.  You know where to find me.