One of the most common dynamics we see in CEO searches occurs when a long-tenured leader steps down and the board begins recruiting a successor.
The outgoing CEO may have served for 15 or 20 years. Over that time, their compensation grew gradually, typically through modest annual increases of two to four percent. The board approved those increases in good faith, and the CEO accepted them. Year over year, the numbers felt reasonable.
But when the board enters the market to recruit a new leader, they often discover that the outgoing CEO’s compensation had quietly fallen well below what the role now commands. The result is a gap, sometimes a significant one, between what the organization has been paying and what it will need to offer to attract a strong successor.
How the gap develops
It happens gradually, which is part of the reason it comes as a surprise to many boards. A CEO who started at a competitive salary 15 or 20 years ago and received consistent three percent annual raises may now be earning a figure that feels substantial in absolute terms. But the market for association and nonprofit CEO talent has not moved at three percent a year. In many cases, it has moved considerably faster.
The complexity of the CEO role has expanded. Competition for executive talent has intensified across sectors. Expectations around advocacy, technology, fundraising, and organizational leadership have grown. All of that has pushed market compensation upward in ways that incremental annual raises simply do not keep pace with.
The outgoing CEO may never have raised the issue. Many long-tenured leaders are deeply committed to their organizations and accept modest increases without pushing back. That loyalty is admirable, but it can mask the growing distance between their compensation and the current market.
What boards discover in the search
When we begin recruiting for these roles, the conversation about compensation often becomes an important early moment in the process. Boards that have been accustomed to a certain salary level for the CEO position sometimes find that what qualified candidates are expecting.
This is not because candidates are being unreasonable. It is because the market has moved, and candidates who are currently serving in comparable roles or who have been recruited across sectors understand what their experience and skill set are worth today. They are making decisions based on current data, not on what a predecessor earned after two decades of incremental increases.
The gap can be meaningful. In some searches, the compensation required to attract a competitive pool of candidates is 20 to 40 percent higher than what the outgoing CEO was earning. For boards that have not been tracking the market, the difference can be significant.
What boards can do about it
The good news is that this is a planning challenge, not an unsolvable problem. Boards that are aware of the dynamic can take steps well in advance of a leadership transition.
Conduct a compensation study before the transition begins. Understanding what the current market looks like for your type of organization and your type of CEO role gives the board time to plan and budget appropriately. A study done 12 to 18 months before an anticipated transition is far more useful than one done after the search has already launched.
Consider adjusting the outgoing CEO’s compensation proactively. If a compensation study reveals a significant gap, some boards choose to bring the current CEO’s pay closer to market before the transition. This serves two purposes: it recognizes the sitting leader’s value, and it helps the board prepare for what a successor will require.
Build the successor’s compensation into the transition plan. A leadership transition plan should include a realistic compensation framework for the incoming CEO. Boards that treat compensation as a separate conversation from succession planning often find themselves making decisions on a compressed timeline.
Why this matters
A well-planned leadership transition is one of the most important things a board can do for the long-term health of the organization. Compensation is a central part of that planning. Boards that understand the gap between legacy compensation and current market expectations are better positioned to attract the right leader, set the relationship up for success from the start, and plan ahead in ways that keep the search process moving smoothly.
The goal is not to overpay. The goal is to be well informed and well prepared so that when the time comes to recruit a new CEO, the board is making decisions based on where the market is today, not where it was when the last leader was hired.
David S. Martin is CEO and Founder of Sterling Martin, a national executive search firm specializing in associations, nonprofits, and mission-driven organizations. Sterling Martin is celebrating its 20th anniversary in 2026.