A growing number of financial executives did not receive a salary increase, according to a new study by Financial Executives Research Foundation (FERF), the research affiliate of Financial Executives International (FEI).
Financial executives in 2008 that did receive a salary bump experienced a slight dip percentage-wise compared with the average salary increase they received in the previous year, while the breadth and depth of their responsibilities continues to expand. However, nearly all of financial executives still reported a bonus in 2008.
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.
The estimated average base salary increase of all respondents is 3.7% – over a percentage point decrease from 2008’s average of 4.96%. 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% 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% reported a bonus between 31-40% 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%).
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%.
-Long-term incentives
Only 18% 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% 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).
“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,” says Marie Hollein, CEO and president, FEI. “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.”
“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,” says Cheryl de Mesa Graziano, vice president, Research and Operations, 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.”
L.D.