PDF Financial Executive Compensation Survey 2015

Financial Executive Compensation Survey 2015

Financial executives see larger salary increases Thomas Thompson Jr. and Ken Cameron

Contents 1 Introduction Private company compensation still lags behind public company compensation 2 No change in finance/accounting staff size Sign-on and retention bonuses Use of variable pay Benefits 3 Perquisites Long-term incentives 4 Performance measures Employment contracts Public vs. private company responses 5 Portraits of the top financial jobs Portrait of a CFO Portrait of a corporate controller Portrait of a VP of finance 8 Applying survey results Survey methodology and demographics 9 About the authors

10 About Financial Executives Research Foundation Inc. About Grant Thornton LLP

11 Our supporters 12 FEI 2015 Distinguished Service Award recipients

Authors Thomas Thompson Jr. Senior research associate Financial Executives Research Foundation Inc.

Ken Cameron Director of Compensation and Benefits Consulting Practice Mid-South Market Territory Grant Thornton LLP

The Financial Executive Compensation Survey 2015 of public and private company financial executives shows a continuing trend of higher salary increases for financial executives at both public and private companies. Public companies reported a 3.9% increase from 3.4% a year ago, while private companies saw a 4.4% increase in 2015, from 3.3% in 2014. These numbers are higher than overall salary increases in the marketplace, which are trending at 3%.

Private company compensation still lags behind public company compensation Despite base-salary increases that are higher overall than increases at public companies, private organizations trail in base and total compensation. Differences between the two groups are greater than 10% among smaller organizations, and the gap increases as the size of the organizations does. The survey data shows that eligibility for long-term incentives is more than double for financial executives of public companies compared with private.

The following chart shows average base salaries by title for public and private companies.

A snapshot of public and private company average base salaries

"As the economy continues to improve, we see the need to attract and retain top talent across all organizations becoming more of an urgent concern," says Ken Troy, director of Grant Thornton LLP's Compensation and Benefits Consulting practice in Los Angeles. "The need for strong financial executives is always of the utmost importance to an organization. As the economy improves, so do the opportunities for an organization to expand, which requires strong finance and accounting talent."

Title

Corporate CFO Corporate controller Vice president (VP) of finance Director (of finance, accounting) Chief accounting officer Treasurer Divisional/geographic/regional CFO

Public

$284,924 $202,912 $223,714 $164,600 $297,500 $235,000 $236,000

Private

$202,692 $136,950 $182,282 $151,300 $233,000 $182,300 $174,300

Financial executives reported higher average

salary increases than the average 3% increase in the business marketplace

4.4%

increase for private companies

3.9%

increase for public companies

Average annual salary increase for all titles

Most-recent increase

Did not receive increase 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% More than 10% Average

2015

24.2% 1.8% 9.4% 21.2% 11.8% 7.9% 2.7% 3.6% 1.8% 0.6% 4.8% 10.0% 4.3%

2014

28.9% 1.5% 10.8% 24.5% 6.4% 9.0% 2.3% 2.6% 3.6% 0.5% 3.4% 6.4% 3.4%

No change in finance/accounting staff size The relative size of the financial organization's staff reported in 2015 remains consistent with data reported last year.

Finance/accounting staff and full-time equivalents

Fewer than 10 10?50 More than 50

2015

Public 8% 24% 69%

Private 28% 30% 43%

2014

Public 9% 24% 67%

Private 25% 30% 46%

Benefits Well more than three-quarters (84%) of both public and private company respondents have a defined contribution plan. Additionally, less than a quarter (22%) of respondents' companies have a defined benefit plan. For those companies that do still offer a defined benefit plan, about half (48%) restrict new entrants or have frozen benefit accruals.

For those companies that provide health insurance, the average percentage paid by the employer was 72%.

Sign-on and retention bonuses In an effort to attract and retain top talent, some companies offer sign-on and retention bonuses. For those companies that do offer a sign-on bonus, the most common offering was a cash bonus (52%) as opposed to equity.

Twenty-seven percent of companies offering a sign-on bonus reported they are targeting bonuses specifically for retention purposes.

Who makes executive compensation decisions? Forty-three percent of companies reported that the CEO/ management makes all pay decisions, while 40% reported that their board of directors makes pay decisions for all senior executives. Good governance is key to effective executive compensation programs, with the compensation committee playing a critical role in the design and decision-making process.

Use of variable pay A little over half (57%) of respondents indicated they have a target bonus opportunity. The median level of bonus percentages for the top finance position in public companies is significantly higher than in private companies.

57%

of respondents indicated they have

a target bonus opportunity

84%

of respondents have a defined contribution plan

2Financial Executive Compensation Survey 2015

Perquisites Of the 77% of executives who reported receiving one or more perquisites, the most popular was cellphone, cellphone allowance or cellphone reimbursement (81%).

The majority of those receiving perquisites (93%) reported that those perquisites have not been reduced in the past year, and the percentage of executives who received one or more perquisites is consistent with results in prior years.

Perquisites

Cellphone, cellphone allowance, cellphone reimbursement Company car or car allowance Paid parking Health/fitness club Commuting expenses Executive physicals Relocation assistance Airline club membership Personal financial or tax advice Auto/car insurance Personal use of property owned or leased by the company Country club membership Housing and other living expenses Dining club membership Other

Percent

81% 19% 17% 12% 9% 8% 8% 8% 6% 5% 4% 4% 1% 1% 6%

Long-term incentives Another important part of the compensation plan design for financial executives is long-term incentives that deliver compensation through cash and/or company stock:

? Cash-based long-term incentives -- Eligibility for receiving long-term cash incentives increased to 22% from last year's 20%.

? Stock-based long-term incentives -- More than three quarters (86%) of public company respondents receive some form of stock-based incentive compensation, while just over one-third (35%) of private company respondents receive some form of stock-based incentive compensation.

?? Of the equity provided through long-term incentives, the trend continues for public companies to use restricted stock or restricted stock units over stock options. The use of multiple long-term incentive vehicles is practiced by nearly one-third of the public companies in this survey.

Stock-based long-term incentives*

I am not eligible to receive this type of long-term incentive Stock options Restricted stock/restricted stock units Performance shares Other

2015

Public 14% 36% 59% 14% 1%

Private 65% 15% 7% 5% 5%

*Respondents could choose all that apply.

81%

report getting cellphone perks

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