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Financial executives see larger salary increases
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%.
“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.”
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 among 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.
For all titles, 24.2% did not receive a salary increase in 2015, 21.2% received a 3% increase, and 10% received an increase of more than 10%.
No change in finance/accounting staff size
The overall size of the financial organization’s staff remains relatively consistent with last year's staff size.
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.
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.
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%.
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.
Of the 77% of executives who reported receiving one or more perquisites, the most popular was cell phone, cell phone allowance or cell phone 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.
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 a third of the public companies in this survey.
Some of the top performance measures used to determine the long-term incentive compensation (cash, stock-based, other) for public and private company respondents are the following: company goals and objectives (the most, at 26 % for both public and private companies), EBITDA, individual goals/objectives, cash flow, share/stock price and net income.
The majority of respondents (64%) said they are not covered by an employment contract. The most common contractual feature is change-in-control severance (61%) followed by severance unrelated to a change-in-control (47%).
Public vs. private company responses
This year’s survey included self-reported responses from public (80 respondents) and private (233 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. See the chart under “Survey methodology and demographics” for breakdowns by company type.
Portraits of the top financial jobs
The following are snapshots of the top three financial executive roles — CFO, corporate controller and VP of finance — for both public and private companies. (Robert Half
provided the job duty descriptions for all the positions described in this report.) See the full report for CFO, corporate controller and VP of finance salary and total compensation statistics.
Portrait of a CFO
Typical duties 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 chief information officers on technology decisions
Overseeing financial systems implementations and upgrades
Managing relationships with investors and investment institutions
Identifying and managing business risks and insurance requirements
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 decision-making 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
Portrait of a VP of finance
Hiring, training and retaining competent accounting staff
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
Applying survey results
Hiring, training and retaining competent finance staff
Ensuring your top financial executives’ compensation package is competitive based on role, size, complexity and type of organization is a critical component of any successful compensation program. In addition to ensuring the total compensation value is correct, it is vital that each individual element is designed correctly and aligned with performance.
Survey methodology and demographics
The data used to compile this research report was collected from responses received from an electronic survey of active Financial Executives International (FEI) members and Grant Thornton LLP clients from November 2014 through February 2015. The 35-question survey garnered 346 total responses. Note that totals throughout the report may vary, because not every respondent answered every question.
Continuing the trend in recent surveys, the percentage of responses from private companies increased slightly, to 69% in 2015 from 66% in 2014, while those from public companies dipped to 23% in 2015 from 27% in 2014.
Consistent with the previous six years, the most heavily represented industry was manufacturing (26%). Similar to the past five years, the most responses came from members employed by companies with corporate headquarters in either Texas (13%) or California (10%).
The majority of respondents (54%) reported a master’s degree as the highest level of education completed. In addition, most respondents (78%) were male. Up slightly from last year’s survey, the average executive has held his or her current position for at least six years.
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 and Grant Thornton clients actually working in the jobs described.
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