Salary Transparency: A Well-Intentioned Regulation That May Complicate the Executive Talent Market

Article written by Victor Carulla, Managing Partner at Headway Executive Search

The new European Pay Transparency Directive, which must be fully implemented by June 2026, has a goal that is difficult to argue against: reducing unjustified pay inequalities — particularly between men and women — while bringing greater transparency to hiring processes.

On paper, it seems like a logical evolution of the modern labor market.

However, as is often the case with labor regulation, theory and practice do not always align. And for certain types of profiles — especially executive, strategic, or hard-to-attract talent — this regulation may create significant unintended consequences.

The Big Shift: Visible Salary Ranges

The market is moving toward a model in which:

• companies will need to define clearer salary ranges,
• candidates will know compensation expectations earlier in the process,
• and there will be less room for purely individualized negotiation from scratch.

This may work reasonably well in large and relatively standardized structures such as finance teams, administrative departments, operational roles, and positions where multiple employees perform comparable functions internally.

For example, within a finance organization there may be 30 accountants, several treasury professionals, 4 internal auditors, 6 controllers… In those cases, internal comparison is relatively straightforward. The challenge appears when we talk about unique leadership positions.

Executive Roles: There Is No True Internal Benchmark

In most organizations, there is typically one CEO, one CFO, one CCO, one COO, one CTO, one CHRO, and so on across the executive leadership team. These profiles do not always fit neatly into a standardized salary band. Because companies are not only paying for “the role.” They are also paying for:

• industry expertise,
• transformational capability,
• leadership,
• reputation,
• network,
• track record,
• growth execution,
• international exposure,
• or even the ability to attract investors, clients, or key talent.

Two CFOs may formally hold the same title while delivering radically different value to a business.

The Risk: Salary Ranges Becoming Too Conservative

This is likely to become one of the most significant side effects of the regulation from 2026 onward.

Out of internal caution — and concern about creating compensation tensions — many companies may choose to communicate conservative salary ranges.

Not necessarily because they cannot pay more.

But because:

• they do not want to publicly commit to higher compensation levels,
• they want to avoid disrupting internal pay balance,
• they do not want to justify exceptions,
• and they prefer to protect themselves against hiring profiles that may ultimately not deliver the expected value.

The result could become paradoxical:

• companies may actually have significant flexibility to increase compensation,
• but the market will not perceive it.

And This Is Where Passive Talent Becomes the Real Issue

The most valuable candidates are often not actively looking for a new job. A strong CFO, a transformational commercial leader, or a high-impact COO is rarely sending résumés to the market. These profiles typically engage only when they perceive:

• a meaningful career step,
• a differentiated project,
• or a sufficiently compelling financial opportunity.

If the communicated compensation range appears similar to — or even below — their current package, many will disengage before even understanding the full opportunity. Even when the company would, in reality, be willing to pay substantially more for the right individual.

Less Flexibility in a Market Where Flexibility Was Essential

Until now, many companies operated with a degree of flexibility: “We have a target budget, but if we find someone exceptional, we can stretch.” Historically, this approach has been critical in:

• executive search,
• business transformation,
• startups,
• high-growth companies,
• succession planning,
• and strategic talent acquisition.

Pay transparency may push many organizations to become publicly more rigid, even if internally they still maintain flexibility. And that could create an unintended consequence:

• fewer conversations with top-tier talent,
• reduced ability to attract passive candidates,
• and hiring processes increasingly limited to active job seekers or candidates under pressure to move.

The Real Challenge Will Not Be Legal — It Will Be Strategic

The regulation will likely improve transparency, fairness, and compensation governance. But it will also force companies to rethink how they attract exceptional talent without losing the flexibility and personalization that executive hiring has traditionally required. Because at the executive level, the market has never functioned like a standardized salary table. And it probably never will.