Sir Alex Ferguson, former manager of Manchester United, had a clause inserted into his contract that stipulated no player should earn more than him, intended to maintain his authority as manager.
Chris Weidenhammer suggests a variant of the same should hold true for CEOs (manager) vs. independent sponsors. He says "as sponsors we think the management fee should never exceed 80% the CEO's salary," a rule he applies to majority recaps (where the CEO/seller rolls at least 25% into common stock sitting behind their preferred shares).
"Under those circumstances we’re signaling that we understand the CEO is focused 24/7 on the business (and not some additional other opportunities), and we’re willing to recognize that difference vs our involvement. That is one way we differentiate ourselves, which helps us when the CEO is comparing us vs. other investors."
"[That said,] it is also common for us that the CEO is not the highest cash-paid employee, in that a superstar sales executive who has a heavily performance-based compensation structure may make more cash compensation than the CEO. However, the CEO’s total compensation includes much more equity upside."
