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News < Back Sarbanes Oxley : Finance : Survey Financial Executives Average Base Salary Down Amidst Expansion of Responsibilities
The third annual Financial Executive Compensation Survey provides a year-to-year comparison of compensation for finance professionals. The study examines salaries, bonuses, long-term incentives and retirement benefits of nearly 1,000 financial executives from both public and private companies, of which half were CFOs. Completed solely by the financial executives themselves, rather than human resources or executive search firm executives, the survey results provide unique perspective. “This year’s results demonstrate that the combination of the economic downturn and increasing pressure on executive compensation has left a clear impact on U.S financial professionals,” said FEI CEO and President Marie Hollein. “While salaries for this group still saw a boost, the percentage of their increase declined from 2008. This, coupled with the fact that a sizeable number of professionals did not receive increases at all this year, reveals that the current crisis is undoubtedly reflected in the compensation of the C-suite.” An indication of the changing role of the CFO and other finance professionals, respondents to the survey revealed that their responsibilities have expanded broadly in areas such as operations, administration, planning, and mergers and acquisitions. Salary & Bonuses The estimated average base salary increase of all respondents is 3.7 percent —over a percentage point decrease from 2008’s average of 4.96 percent. However, nearly a third of respondents (31%) did not receive any salary increase - nearly double the amount (16%) who indicated no increase when surveyed in early 2008. An overwhelming 94 percent of survey respondents reported receiving a 2008 bonus. While bonus awards varied, nearly one fifth (18%) of financial executives reported a bonus between 21-30 percent of their base salary, and another 17 percent reported a bonus between 31-40 percent of their base salary. For the third year in a row, the base salaries of public and private company CFOs remained proportionate to companies’ annual revenues. Public companies continued to award higher salary increases (4%) versus their private company counterparts (3.4%). For the 122 public company CFOs, the average annual compensation reported is $410,100, of which $296,800 is the base salary, representing an increase from the prior year survey ($373,100). Bonuses for these CFOs are based on a percentage of annual salary and ranged from 21-70 percent. For the 344 private company CFOs, the average total compensation is $257,800, of which $199,600 is base salary, representing a slight decrease from the prior year ($262,800). Bonus percentages for these CFOs ranged from 11-50 percent. Beyond the Paycheck “As the debate over salaries and cash-based bonuses continues to intensify, companies will be examining other types of compensation benefits as a means to award and retain professionals,” said Cheryl de Mesa Graziano, Vice President, Research and Operations for FERF. “Our survey results reveal this challenge as decreases in retirement and long-term cash pay come with increases in stock-based long-term awards. Also, though most companies are commonly using company goals to evaluate performance, this year’s survey surprisingly reveals a decreased emphasis on individual goals, with more companies choosing EBITDA as a form of measurement.” Key survey findings on areas of non-salary and bonus compensation include: Retirement While an overwhelming majority of respondents work for companies with defined-contribution plans that provide an employer match, the number of respondents actually eligible to receive monthly benefits from their company’s defined benefit plan (19%) saw an overall decrease from 2008 (24%). The overall number of supplemental retirement plans continues on a three-year decline. The number of executives that are not entitled to receive additional monthly retirement benefits jumped to 84 percent. Long-term incentives Only 18 percent of respondents received cash-based long-term incentives, representing a continued decrease over the three years the survey has been conducted. On the contrary, 59 percent received some type of stock-based award. Board/management discretion, title or position and salary grade level are the primary criteria for determining if an individual is eligible for long-term incentives. Perks The most common perk among respondents is the cell phone (76.4% of financial executives receive); The least popular perk continues to be, for the third year in a row, housing or other living expenses (less than 1% of financial executives receive). Performance measures For public company respondents, the most common performance measures used to determine annual compensation continue to be company goals and objectives (69.8% of public company respondents). However, this year the decrease in individual goals and objectives as a performance measure (40% of public company respondents, compared with 74% in 2008) has been offset by an increase in the use of earnings before interest, taxes, deprecation and amortization (EBITDA) (48% compared with 16% in 2008). Employment contracts A majority (54%) of those surveyed still have employment contracts. The use of such contracts is identical to the prior year, with some type of severance pay as the most common provision (applies to at least 29% of those who have employment contracts). Detailed results of all responses are available online through Paycheck, FEI’s online search tool. Responses can be searched based on all criteria, including: title, company industry, company type, company location, company annual revenue, base salary, and annual bonus opportunity. PayCheck is available on the FEI website www.financialexecutives.org. Non-members can purchase the survey results for $129, by visiting the FERF bookstore online at www.ferf.org/bookstore. (Results are free for all FEI members.) Financial Executives International is the leading advocate for the views of corporate financial management. Its 15,000 members hold policy-making positions as chief financial officers, treasurers and controllers. FEI enhances member professional development through peer networking, career management services, conferences, teleconferences and publications. Members participate in the activities of 85 chapters, 74 in the U.S. and 11 in Canada. Financial Executives Research Foundation (FERF) is the non-profit 501 (c)(3) research affiliate of FEI. FERF researchers identify key financial issues and develop impartial, timely research reports to FEI members and non-members alike, in a variety of publication formats. ______________________________________________________ 
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