No.
In standard retained search agreements, stock options, RSUs, and other forms of equity are not included in the “Total First-Year Cash Compensation” used to calculate the executive search fee. This is because retained fees are anchored to liquid, first-year cash earnings — not future potential or illiquid instruments.
Why Equity Is Excluded from Search Fee Calculations
There’s a sound financial rationale behind this practice, grounded in industry-wide norms and accounting principles. Here’s why equity doesn’t count toward the search fee:
- It’s Not Cash
Retained search fees are based on guaranteed, cash compensation that the candidate will earn in the first 12 months — including base salary, sign-on bonuses, and non-discretionary bonuses. Equity, by contrast, is non-liquid and non-guaranteed. - Unrealized and Variable Value
The value of equity — especially in startups and privately held companies — is speculative. Options may be underwater, and RSUs depend on future company valuations. A fee based on equity would introduce volatility and misalignment of value. - Long-Term Vesting Schedules
Equity compensation typically vests over four years or more. Since most of that value is not realized within the first year, it falls outside the scope of what is considered “cash compensation for headhunter fee” purposes.
Are There Exceptions? Yes, Rarely.
In rare, early-stage startup scenarios where cash is minimal and equity is the dominant form of compensation, a different, negotiated fee structure may apply. In such cases, both client and search partner may agree on a hybrid or milestone-based model, but this is an exception, not the norm.
Equity Still Matters — Just Not for Fee Calculation
While equity isn’t part of the retained search fee calculation example, it plays a crucial role in the overall value proposition of the role.
A large equity stake can make a mid-level cash offer compelling — and it’s our job as your executive search partner to articulate that upside to candidates with the financial acumen to appreciate it.
We ensure equity is positioned not just as a perk, but as a strategic incentive, aligned with the company’s growth trajectory and the candidate’s long-term impact.
Learn More About Executive Search Fees
Still have questions about what’s included — and what isn’t?
Dive deeper into our complete breakdown:
👉 The Retained Search Fee Structure Explained: A Guide to Pricing & ROI
