Retaining Top Leadership: 7 High-Impact Executive Incentives That Keep Talent Anchored

Attracting top-tier leadership talent to a company is challenging, but retaining it is even more difficult. There are often only a very small number of people in any city who are really in a qualified position to run a major company. These individuals often take non-standard routes through corporate hierarchies, or perhaps found their own companies and then move horizontally into enterprise settings.

Competitive base salaries are a good way to keep executives interested, but many times you need to do more than that. Here are some of the ways you can retain the top leadership in your firm so your company can continue to perform on a local, national, and global scale

Supplemental Executive Retirement Plans

One path you can go down is offering Supplemental Executive Retirement Plans, or SERPs. These are employer-funded, non-qualified plans that provide a substantial retirement income beyond standard pensions and government-capped vehicles.

SERPs usually have aggressive cliff-vesting schedules that run for more than 10 years and require continuous service until retirement age. Walking away from them prematurely can forfeit substantially accrued balances, which gets executives to stick with you for longer.

Also, a defined benefit SERP guarantees a predictable percentage of final average pay, and this is something that many executives want to maximise over the course of a career. It makes it more difficult for them to move, as the same offer may not be available at the target firm.

Structured Executive Sabbaticals

Regular employees don’t get sabbaticals, but it’s something that executives often demand. Many people in leadership positions in firms experience burnout, and it’s one of the leading non-monetary causes of executive turnover. Many people become physically and mentally exhausted and need to take a break. Often, it’s not about getting a bigger paycheck, but also about seeking greater agency, flexibility, and relief.

One of the best ways to drive retention is to offer tenure-based sabbaticals. For example, you could grant up to eight-week sabbaticals for every five years of senior service as a form of reward for sustained dedication to the cause. 

You could also provide direct influence on strategic initiatives, giving executives more autonomy over how their discretionary innovation budgets are spent. Many people in leadership positions in companies want control over the company direction and the impact that it has on people around them.

Special Long-Term Care And Life Insurance Plans

You could also look at the option of special long-term care and life insurance plans, which are important for executive leaders. For example, you can offer car-vap plans that use corporate funds to finance individual plans, as well as disability cover and long-term care insurance policies. You can structure these programmes so that the policy ownership transfers entirely to the executive only when they complete a minimum tenure requirement, usually between 7 and 10 years.

You could also add supplemental disability coverage to bridge the gap between the group plan’s maximum caps and executives’ actual total earnings. This can provide their families with protection against potential worst-case scenarios in the future.

Phantom Stock Plans

What about phantom stock plans? Are they a good way to retain executive and leadership talent?

Sometimes actual voting equity is impractical, including in subsidiaries and family enterprises. In this case, a phantom stock plan can be a good alternative. The idea here is a contractual agreement granting the executive a right to cash payments tied directly to the appreciation of company value over time.

The nice thing about this approach is that it gives the executive the ability to benefit from increasing company value, which they are directly responsible for, while also preventing dilution and transferring ownership away from you, the company owner. In this way, executives can benefit from wealth generation that usually only comes if you’re a public company leader, but without any impact on voting board dynamics, allowing you to retain significant control.

You can also structure the phantom units to settle on future liquidity events, recapitalizations, or specific retirement thresholds. This, again, allows you to create incentives that encourage executives to have a longer tenure with your company.

Provide Them With Thoughtful Gifts

A simpler strategy is to provide leaders with personalized executive gifts. These are a fantastic option if you’re trying to build a closer personal relationship with the leaders on your team. It can be a great way to exert soft power over them if leaders think they’re part of a company that really appreciates them for who they are, because it spends a lot of time considering their needs.

Try to avoid presenting gifts as part of their remuneration package. Instead, position it as a simple gift that’s allowed under your company policies. Provide things like gift vouchers or personalised stationery that they can use as part of their work.

Milestone Retention Bonuses

One of the simplest approaches is to use a milestone retention bonus to encourage high-level executives to remain with you. Standard signing bonuses often attract executives, but milestone-based retention bonuses keep them there for longer. You can structure retention payouts in various waves, for example:

• 30% at year 2
• 30% at year 4
• 40% at year 5

By laddering the percentages in this way, you encourage employees to stick with you longer, allowing you to complete projects on more distant time horizons. This makes it more likely that you’ll keep the same exec for a specific project rather than going through the costly process of having to change them half-way through. 

Non-Qualified Deferred Compensation (NQDC) Plans

Finally, you could explore non-qualified deferred compensation (NQDC) plans. These allow executives to defer a large portion of their pre-tax salary and annual bonuses into investment vehicles to grow them tax-deferred until a distribution date.

It works for attention because you can structure distributions around specific 10-year milestones. You can also use company matching and vesting schedules. For example, offering discretionary employer matches subject to a 4- to 6-year vesting schedule builds more of a financial cushion for your executives after longer tenure.

So there you have it. Which of these strategies are you going to use to retain top talent in your business?