This is a composite, and the details are invented. A PE-backed industrial services company doing about $120 million is eleven weeks into a confidential, retained search for a new CFO. The board has approved the offer: a $375,000 base, a target bonus, and equity in the management plan. The finalist runs finance for a division of a larger public company. In her third conversation with the operating partner, she mentions something nobody had asked about. If she resigns in January, she gives up stock that vests in March and a bonus her employer pays in February, but only to people still on the payroll. The board thought the offer was the cost. It was the starting point.
The candidates a retained search exists to find usually have jobs. They aren't on job boards and they aren't in a hurry. Their employers know that, and design pay to make leaving expensive: stock that vests on a schedule, bonuses paid only to people employed on the payout date, sign-on money that has to be paid back if they leave early. None of it shows up from the board's chair. You can't call her employer to ask, because the search is confidential. She is the only source, and most finalists don't volunteer the full number until an offer is close.
How common the buyout has become
The best public data comes from large companies, so read it as a signal for your seat, not as a measure of it. Glass Lewis reviewed sign-on awards disclosed in the 2025 proxy season (January 1 to June 30, 2025). At S&P 500 companies, 53% of sign-on awards cited make-whole considerations, meaning they replaced pay the executive forfeited by leaving. That was up from 39% in 2024 and 45% in 2023. Across the broader Russell 3000 the share was 23%, up from 19%. Make-whole sign-ons at S&P 500 companies averaged about $4.6 million, against $3.5 million for all sign-on awards. Glass Lewis does not state how many awards sit behind those percentages.
Share of S&P 500 sign-on awards in the 2025 proxy season that cited make-whole considerations, up from 39% the year before.
Glass Lewis, March 19, 2026Meridian Compensation Partners' 2026 study of 95 S&P 500 CEO employment agreements found cash sign-on bonuses in 65% of the external hires it reviewed. That base is only 20 external hires, so treat it as a direction.
We could not find a credible public source on make-whole awards at private mid-market companies. The numbers above are not your market. What carries over is the mechanism. If your finalist comes from a public company or a larger sponsor-backed business, her pay was built to keep her where she is.
A walk-away ledger, worked through
Here is the CFO finalist from the opening, with invented inputs. These are the five lines a retained search should have on paper by the second conversation.
| What she gives up by leaving in January | Invented amount | What decides it |
|---|---|---|
| Restricted stock vesting in March | $180,000 | Her grant schedule |
| Annual bonus paid in February to employees on payroll | $95,000 | Her employer's bonus plan rules |
| Repayment of a prior sign-on bonus if she leaves within 24 months | $40,000 | Her current offer letter |
| Unvested retirement match | $12,000 | Her employer's plan vesting rules |
| Notice period | 4 weeks | Her employment agreement |
| Walk-away cost | $327,000 |
On these made-up numbers, buying her out fully adds 87% of her base salary to year one. Most boards would want to know that before they spend eleven weeks on a slate.
There are four ways to handle it, and each one costs something.
- Wait. Start her after the bonus pays and the stock vests. The buyout falls to about $52,000 in repayment and match, but the seat stays open about ten weeks longer.
- Buy out in cash. Pay a sign-on that she repays if she leaves within a set period. It is fast and simple, and it is a cost the board sees in full.
- Replace with equity. Grant new equity in your plan that vests over time. It ties the buyout to the result, but only if she believes the equity is worth something.
- Walk away. Sometimes the honest answer is that this finalist's ledger is too heavy for this seat, and the second finalist with a lighter one is the better hire.
Waiting is where the start date and the search interact. If the seat cannot sit empty for ten more weeks, a fractional CFO can hold it, and that may cost less than the buyout. Do that arithmetic with your own numbers, because sometimes it goes the other way.
The offer the board approves is the starting point. The finalist's walk-away cost is the real price.
Why a retained search should price this in week two
A contingent recruiter is paid when someone starts, so the pressure is to get to an offer and solve the buyout there. A retained firm is paid to run the process, and part of that process is knowing the full price of each finalist before the board falls in love with one. This is one of the ordinary things a retained engagement should buy you.
It also has to be done in a way that protects the candidate. In a confidential search, the employer is off limits as a source, the same way it is for references. The candidate tells you, in confidence. At the offer stage, she can share her own grant statements and offer letter so the numbers can be checked. Nobody calls her company.
One more question belongs in writing before you sign with any firm: is the search fee calculated on a sign-on bonus or buyout? Practices vary across firms and contracts, so ask.
Five questions to ask every finalist early
- What equity would you forfeit, and on what dates does it vest over the next 18 months?
- When does your bonus pay, and do you have to be employed on that date to receive it?
- Do you owe any sign-on, relocation or tuition money back if you leave?
- What is your notice period, and does your agreement restrict who you can hire or call after you leave?
- If we could not match all of it, what matters most to you, and what start date would you choose?
The last answer tells you more than the first four. A candidate who says the March vest matters and the bonus doesn't has just shown you how to build the offer. The fourth question overlaps with restrictive covenants, which can matter as much as the money for a senior hire.
What this is not
It is not an argument against hiring employed candidates. They are usually the people you want. It is not a reason to pay whatever a finalist asks, either. A buyout is a negotiation like any other part of the offer, and a counteroffer from her employer may arrive the week she resigns, as covered in The Counteroffer Trap. It is not tax or legal advice. How a buyout is paid, taxed and clawed back varies, so involve your compensation adviser and counsel.
And sometimes the right answer is the finalist with the smaller ledger. Write the process rule down at the first interview: record each finalist's walk-away cost, set the most the board will pay to buy it out, and review both at the offer. If a number changes, the board finds out in week two, not week eleven.