Q: Dear SaaStr: Is it Ethical For a Startup CEO to Accept a Sales Commission for Deals They Close Themselves?
It’s a bit odd, because you want the CEO’s incentives to be aligned with the whole company’s, not just her or his individual efforts.
An annualized bonus for meeting the stretch plan is a great idea for a CEO. But not a deal-by-deal commission like a sales rep. It’s a bit of a flag of someone not going big, of not seeing the real win in their equity, not just in a short term contract or two. A CEO who optimizes on short-term comp never really goes the distance.
But still — I did it once. Once, when the economy was in the dire straits it was in during ‘08-’09, and it looked like the world was over.
I went to several of our big customers, and asked them to pay more then, and to pre-pay up front. Even though their contracts weren’t up.
And they did it. All 3 of them. It basically brought in enough cash to fund us for the better part of a year, given our low burn rate. Another almost $400,000 in cash. That wasn’t for the most part due for almost a year.
I then asked the board for a $10k bonus. Just enough to acknowledge a little respect for the somewhat insane task of bringing in many hundreds of extra thousands of dollars from customers that had no contractual incentive to pay it. I needed to feel a little nod that I had Done Good, done something crazy and hard to do, for everyone, all the stakeholders.
It was a rough board meeting. They said No. So that sort of tells you how folks usually view a CEO taking a sales commission.
(Note: an updated SaaStr Classic answer)
Published on March 18, 2023
