Why it matters
Some restriction here is fair — investors don't want their capital paying out as founder salary or as round-tripping loans. The unfair version sets the cap so low that it materially squeezes founders who already took below-market pay to start the company. A $150k cap on a CEO salary in San Francisco means you're not building any savings, you're potentially borrowing money for normal life events (mortgage, medical), and you're permanently disadvantaged versus the team you hire below you. Compensation caps without an inflation adjustor become more punitive every year.
How to negotiate
Tie founder salaries to a market band (e.g. 50th-75th percentile of comparable VC-backed companies, by stage and headcount, per a referenceable benchmark like the Pave or Carta data). Allow for board-approved raises tied to round closings. Carve out routine company benefits that all employees receive. Reject the loan prohibition on routine company-paid expenses (relocation, equipment, professional services); restrict only personal loans and guarantees.
Example language
How this clause typically appears in a term sheet. Read it carefully — predatory language is often buried in routine paragraphs.
The base salary of each Founder shall not exceed $150,000 per annum without the prior written consent of the Major Investors, and the Company shall not make any loan to, or provide any guaranty of indebtedness for, any Founder or related party.
TURNSHEET provides intelligence, not legal advice. This page describes typical market behaviour and common negotiation tactics; your specific deal may have nuances that change the analysis. Always review your term sheet with qualified legal counsel before signing.