Financial Executive Compensation Survey Thomas (Tom) Thompson and Ken Cameron

Transcription

1 Financial Executive Compensation Survey 2016 Thomas (Tom) Thompson and Ken Cameron

2 Contents 1 Financial executives salary increases taper off 2 Slight changes in finance/accounting staffing levels Sign-on and retention bonuses Use of variable pay Benefits 3 Perquisites Long-term incentives 4 Performance measures Employment contracts Public versus 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 10 About the authors 11 About Financial Executives Research Foundation Inc. About Grant Thornton LLP 12 Our supporters Authors Thomas (Tom) Thompson Research Manager Financial Executives Research Foundation Inc. Ken Cameron Compensation and Benefits Consulting Director Grant Thornton LLP

3 The Financial Executive Compensation Survey 2016 of public and private company senior-level financial executives saw an average reported salary increase of 4.0% for all respondents. The demand for experienced financial and accounting executives is at its strongest in recent years, says Ken Troy, director of Grant Thornton LLP s Compensation and Benefits Consulting practice in Los Angeles. Companies need to pay attention to changes in the competitive market for talent. They also should have a clear strategy that defines how they will best attract and retain the executives in these key roles. Financial executives salary increases taper off The average salary increase for financial executives at both public and private companies dipped slightly compared to last year. Public companies reported an increase of 3.7%, a decrease from 3.9% a year ago, while private companies saw a 4.1% increase in 2016, from 4.4% in These numbers are consistent with broader market data. The following charts show average annual salary increases, and base salaries by title for public and private companies. A snapshot of public and private company average base salaries Title Public Private CFO $303,975 $217,509 Corporate controller $229,895 $161,374 Vice president (VP) of finance $240,286 $177,289 Director (of finance, accounting, etc.) $176,277 $154,547 Chief accounting officer $303,380 $201,250 Divisional/geographic/regional CFO $222,274 N/A Divisional/geographic/regional controller $193,333 $141,676 Average annual salary increase for all titles The average salary increase for financial executives at both public and private companies dipped slightly compared to last year. Most recent increase % (Did not receive increase) 26.5% 24.2% 28.9% 1% 1.2% 1.8% 1.5% 2% 8.4% 9.4% 10.8% 3% 27.6% 21.2% 24.5% 4% 7.8% 11.8% 6.4% 5% 9.0% 7.9% 9.0% 6% 2.9% 2.7% 2.3% 7% 2.6% 3.6% 2.6% 8% 1.7% 1.8% 3.6% 9% 1.5% 0.6% 0.5% 10% 3.5% 4.8% 3.4% More than 10% 7.3% 10.0% 6.4% Average 4.0% 4.3% 3.4%

4 Slight changes in finance/accounting staffing levels The relative size of the financial organization s staff reported in 2016 saw slight decreases at smaller companies, while larger organizations, public companies in particular, saw increases compared with data reported last year. Finance/accounting staff and full-time equivalents Public 2016 Private Fewer than 10 7% 26% % 30% % 7% % 11% % 8% % 7% 1,000 5,000 26% 9% Over 5,000 15% 2% Benefits Nearly all (95%) public and private company respondents have a defined contribution plan. Additionally, less than one quarter (23%) of respondents companies have a defined benefit plan. For companies that do still offer a defined benefit plan, nearly half (47%) restrict new entrants or have frozen benefit accruals. For those companies that provide health insurance, the average percentage paid by the employer was 73%. Who makes executive compensation decisions? Almost half (45%) of companies reported that the CEO/management makes all pay decisions, while 44% 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. 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 (46%) followed by stock options or restricted stock (28%), and a combination of cash and restricted stock or options (26%). Twenty-eight percent of companies reported they are targeting bonuses specifically for retention purposes. Use of variable pay More than half (60%) of respondents indicated they have a target bonus opportunity. This year, the median level on bonus percentages for the top finance position at private companies is slightly higher than at public companies. More than half 60% of respondents indicated they have a target bonus opportunity. 2 Financial Executive Compensation Survey 2016

5 Perquisites For the 84% of financial executives who reported receiving one or more perquisites, by far the most popular was cellphone, cellphone allowance or cellphone reimbursement (94%). The majority (86%) of those receiving perquisites reported that those perquisites have not been reduced in the past year, and the percentage of executives who received one or more perquisites increased slightly from the prior year s results. Benefits and perquisites all responses Percent 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 incentives eligibility for receiving long-term cash incentives held steady at 22%, the same as last year. Stock incentives more than four-fifths (89%) of public company respondents receive some form of stock-based incentive compensation, while just under one-third (35%) of private company respondents receive some form of stockbased incentive compensation. Cellphone, cellphone allowance, cellphone reimbursement 94% Company car or car allowance 24% Paid parking 19% Health/fitness club 17% Airline club membership 10% Executive physicals 10% Personal financial or tax advice 10% Relocation assistance 10% Commuting expenses 9% Auto/car insurance 6% Other 6% Country club membership 4% Personal use of property owned or leased by the company 3% Dining club membership 2% Housing and other living expenses 2% Stock-based long-term incentives* Public 2016 Private I am not eligible to receive this type of long-term incentive 10% 64% Stock options 27% 17% Restricted stock/restricted units (RSUs) stock 47% 8% Performance shares 13% 6% Other 3% 5% *Respondents were able to choose more than one answer. Payout packages for executives who are eligible for longterm incentives (cash, stock-based or other) and whose awards have a performance or market condition for vesting, the most common measures for determining payouts were company strategic goals/objectives (19%), followed by more specific company financial performance measures such as EBITDA, with 15%.

6 Performance measures The following chart shows the performance measures used to determine the long-term incentive compensation (cash, stockbased, other) for public and private company respondents. Employment contracts Slightly more than half of respondents (52%) said they are not covered by an employment contract. For those who are, the most common elements (60% each) were change-in-control severance and severance unrelated to a change in control. Performance measures* Public 2016 Private Company goals/objectives 38% 37% EBITDA 10% 39% Individual goals/objectives 10% 5% Cash flow 10% 12% Earnings per share growth 28% 1% Share/stock price 10% 12% Revenue growth 12% 7% EBIT 14% 12% Department goals/objectives 10% 8% Net income 16% 8% Return on equity 10% 5% Return on capital 12% 5% Economic value added 2% 5% Performance against companies within a peer group 8% 3% Return on assets 6% 5% Relative total shareholder return share price/stock price of peer company's stock 20% 1% Other 10% 9% Employment contracts all responses* Percent Change-in-control severance, number of months salary continuation 60% Severance not change in control, number of months salary 60% Minimum or guaranteed level of compensation 10% Tax gross-ups or other reimbursement of taxes owed with respect to compensation and benefits Guaranteed level of annual bonus 4% Housing and other living expenses 2% *Respondents were able to choose more than one answer. Public versus private company responses This year s survey included responses from public (85 respondents) and private (223 respondents) companies. In general, we attempted to separate public and private company responses to discourage direct comparisons of respondent data because of variations such as the much larger size and revenues of the public respondents, and the much higher number of private company respondents. Please see the chart titled "Number of responses by company type"on page 9 for breakdowns by company type. 8% *Respondents were able to choose more than one answer. Slightly more than half of respondents 52% said they are not covered by an employment contract. 4 Financial Executive Compensation Survey 2016

7 Portraits of the top financial jobs The following represents a snapshot of the top three financial executive roles CFO, corporate controller and VP of finance for both public and private companies. Portrait of a CFO Typical duties 1 may include: Providing strategic management of the accounting and finance functions Directing accounting policies, procedures and internal controls Recommending improvements to ensure the integrity of a company s financial information Managing or overseeing the relationship with independent auditors Collaborating with CIOs on technology decisions Overseeing financial systems implementations and upgrades Managing relationships with investors and investment institutions Identifying and managing business risks and insurance requirements 1 The job duties for all the positions described in this report are from the 2013 Glossary of Job Descriptions for Accounting and Finance published by Robert Half. Portrait of a CFO Public Private Median base salary $309,000 $208,000 Median annual bonus $110,000 $58,474 Median total compensation, including salary, bonus, longterm compensation and value of all benefits $639,000 $406,474 Eligible to receive cash-based long-term incentives 34% 24% Eligible to receive stock-based long-term incentives 88% 36% Employment contracts prevalence 81% 55% Eligible to participate in a defined benefit plan 28% 13% Has a master s degree 61% 53% Years in current position 6 5 Female 6% 12% Male 94% 88% CFO salary and total compensation statistics Base salary by revenue range Less than $100 million $100 million $999 million $1 billion and more All Public Private All Public Private All Public Private Number of responses Average $189,532 $227,594 $184,540 $258,650 $352,160 $249,483 $352,875 $393,750 $312,000 25th percentile $157,000 $190,000 $155,000 $206,000 $303,000 $200,000 $293,250 n/a n/a Median $178,000 $202,500 $175,000 $247,500 $392,800 $244,800 $350,000 n/a n/a 75th percentile $215,000 $255,188 $215,000 $275,000 $400,000 $269,000 $400,000 n/a n/a Total compensation by revenue range Less than $100 million $100 million $999 million $1 billion and more All Public Private All Public Private All Public Private Number of responses Average $364,631 $463,097 $351,717 $446,664 $690,840 $422,725 $1,019,840 $1,462,655 $577,025 25th percentile $197,900 $313,782 $183,000 $292,335 $590,000 $285,750 $566,700 n/a n/a Median $238,000 $397,500 $220,000 $363,400 $624,800 $360,000 $864,060 n/a n/a 75th percentile $363,000 $513,063 $335,000 $573,500 $835,400 $519,250 $1,248,750 n/a n/a

8 Portrait of a corporate controller Typical duties may include: Planning, directing and coordinating all accounting operational functions Managing the accumulation and consolidation of all financial data necessary for an accurate accounting of consolidated business results Coordinating and preparing internal and external financial statements Coordinating activities of external auditors Providing management with information vital to the decisionmaking process Managing the budget process Assessing current accounting operations, offering recommendations for improvement and implementing new processes Evaluating accounting and internal control systems Evaluating the effectiveness of accounting software and supporting database, as needed Developing and monitoring business performance metrics Overseeing regulatory reporting, frequently including tax planning and compliance Hiring, training and retaining competent accounting staff Portrait of a corporate controller Public Private Median base salary $211,250 $156,000 Median annual bonus $70,000 $33,313 Median total compensation, including salary, bonus and value of all benefits $398,033 $211,650 Eligible to receive cash-based long-term incentives 8% 27% Eligible to receive stock-based long-term incentives 100% 40% Employment contracts prevalence 69% 26% Eligible to participate in a defined benefit plan 42% 23% Has a master s degree 75% 50% Years in current position 4 4 Female 17% 27% Male 83% 73% Corporate controller salary and total compensation statistics Base salary by revenue range Less than $100 million $100 million $999 million $1 billion and more All Public Private All Public Private All Public Private Number of responses Average $141,278 n/a $132,357 $180,374 n/a $174,795 $233,624 $254,820 $184,167 25th percentile $120,000 n/a $119,250 $137,300 n/a $133,750 $165,625 $192,500 n/a Median $156,000 n/a $145,000 $178,325 n/a $170,825 $228,750 $235,000 n/a 75th percentile $162,000 n/a $158,000 $200,000 n/a $200,000 $269,375 $308,384 n/a Total compensation by revenue range Less than $100 million $100 million $999 million $1 billion and more All Public Private All Public Private All Public Private Number of responses Average $246,673 n/a $196,079 $293,345 n/a $262,826 $432,692 $499,269 $277,344 25th percentile $156,000 n/a $143,188 $189,938 n/a $174,275 $331,150 $386,250 n/a Median $190,500 n/a $172,850 $244,071 n/a $228,500 $389,000 $393,565 n/a 75th percentile $402,500 n/a $192,063 $351,875 n/a $322,625 $402,141 $582,500 n/a 6 Financial Executive Compensation Survey 2016

9 Portrait of a VP of finance Typical duties may include: Ensuring compliance with state and federal regulations Establishing and maintaining sound relationships with financial institutions, including commercial and investment banks Making recommendations to optimize investments of financial capital Coordinating and managing the annual budget process Communicating the company s actual performance versus budgets and objectives to senior management Recommending growth strategies, as well as identifying areas for improvement Collaborating with leaders of other departments to prepare for critical business opportunities Hiring, training and retaining competent finance staff Portrait of a VP of finance Public Private Median base salary $245,000 $177,500 Median annual bonus $70,000 $43,400 Median total compensation, including salary, bonus and value of all benefits $455,000 $226,000 Eligible to receive cash-based long-term incentives 43% 18% Eligible to receive stock-based long-term incentives 88% 36% Employment contracts prevalence 82% 26% Eligible to participate in a defined benefit plan 57% 11% Has a master s degree 57% 56% Years in current position 4 6 Female 29% 30% Male 71% 70% VP of finance salary and total compensation statistics Base salary by revenue range Less than $100 million $100 million $999 million $1 billion and more All Public Private All Public Private All Public Private Number of responses Average $152,471 n/a $143,046 $209,292 n/a $207,682 $222,222 $236,000 $205,000 25th percentile $127,500 n/a $125,000 $186,750 n/a $184,500 $185,000 $210,000 n/a Median $141,500 n/a $140,000 $208,500 n/a $200,000 $210,000 $245,000 n/a 75th percentile $173,250 n/a $168,000 $225,500 n/a $222,500 $250,000 $250,000 n/a Total compensation by revenue range Less than $100 million $100 million $999 million $1 billion and more All Public Private All Public Private All Public Private Number of responses Average $192,067 n/a $174,149 $318,036 n/a $295,321 $465,102 $431,300 $507,354 25th percentile $151,250 n/a $150,000 $233,000 n/a $232,000 $269,415 $350,000 n/a Median $177,000 n/a $169,000 $244,201 n/a $242,000 $455,000 $455,000 n/a 75th percentile $205,100 n/a $202,250 $349,233 n/a $304,200 $645,000 $477,500 n/a

10 Applying survey results When applying this market data to your organization, take a close look at the type of organization (public versus private), the revenue scope, and the role/responsibility and experience of the individual. All of these factors play a key role in determining whether or not your organization is paying at competitive levels. It is also important to note that individual and organization performance will have an impact on compensation levels. Organizations experiencing a downturn in performance (and in turn lower bonus payments) are at greatest risk of losing their top talent in a strong market. Survey methodology and demographics The data used to compile this research report was collected from responses received from an electronic survey of active Financial Executive International (FEI) members from October 2015 through January The 37-question survey garnered 363 total responses. Note that totals throughout the report may vary, because not every respondent answered every question. The response rate from private companies held steady at 67%, the same as in Meanwhile, responses from public companies increased to 25% from 23% in The median revenue size for all companies increased to $125 million in 2016 from $109 million in Consistent with the previous seven years, the most heavily represented industry was manufacturing (25%). Similar to the past six years, the most responses came from members employed by companies with corporate headquarters in either Texas (14%) or California (13%). The majority of respondents (57%) reported a master s degree as the highest level of education completed. In addition, most respondents (80%) were male. The average executive has held his or her current position for at least six years, the same as was reported in last year s survey. It s important to note that the survey was completed by senior financial executives rather than by HR or executive search firm executives, and does not represent an empirical compensation analysis. Rather, the survey reflects the views of FEI members actually working in the jobs described. The majority of respondents 57% reported a master s degree as the highest level of education completed. 8 Financial Executive Compensation Survey 2016

11 Number of responses by company type Titles Public Private Nonprofit Government Total Percent Corporate CFO % Corporate controller % VP of finance % Director (of finance, accounting) % Chief accounting officer % Consultant % COO % Divisional/geographic/regional CFO % Divisional/geographic/regional controller % Chief auditor/vp of internal audit % Treasurer % Chief tax officer/vp of tax % Manager (of finance, accounting) % Assistant controller % Corporate president and/or CEO % Managing director % Chief administrative officer % VP of strategic planning and business development % Other % Grand totals % Percentages 24% 66% 9% 1% 100%

12 About the authors Thomas (Tom) Thompson Thomas (Tom) Thompson is a research manager with Financial Executives Research Foundation (FERF), the nonprofit research affiliate of Financial Executives International (FEI). Thompson specializes in qualitative and quantitative research methodologies, and has authored more than 60 executive reports and white papers. He earned a BA in economics from Rutgers University and a BA in psychology from Montclair State University. Prior to joining FERF, Thompson held positions in business operations and client relations at NCG Energy Solutions, AXA-Equitable and Morgan Stanley Dean Witter. Thompson can be reached at [email protected] or Ken Cameron Ken Cameron, CCP, PHR, is a director in Grant Thornton s Compensation and Benefits Consulting practice in Atlanta, and serves as a Southeast region compensation leader. He has more than 25 years of compensation and HR leadership experience. Before joining Grant Thornton, Cameron was a senior consultant at an international HR consulting firm, and he also worked for more than 10 years as a compensation and benefits and HR leader for BellSouth. He earned an MS in industrial relations from Loyola University s Institute of Industrial Relations and a BA in psychology from the University of Rochester. He is a frequent speaker on compensation and human capital trends and issues, and has contributed to publications including The Wall Street Journal, Crain s New York Business, Bloomberg BNA and Accounting Today. Cameron can be reached at [email protected]. 10 Financial Executive Compensation Survey 2016

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