FEI Study: Pay Freeze Continues for Majority of Finance Execs

MORRISTOWN, N.J., June 8 /PRNewswire/ -- Reflective of the past year's economic woes, a majority of financial professionals are still not receiving salary increases, revealed findings from a survey released today and conducted by Financial Executives Research Foundation (FERF).  While many executives are however still reporting bonus awards, increases to average base salaries that were awarded during the past year were significantly less than those awarded in the previous year.  The profession has also fallen victim to job cuts, with respondents indicating a drop in finance staff, compared to the past four years of the survey.

The Financial Executive Compensation Survey, now in its fourth year, provides a year-to-year comparison of compensation for finance professionals. The study examines salaries, bonuses, long-term incentives and retirement benefits of more than 1,100 financial executives from both public and private companies, nearly half of which were CFOs.  The survey gives a unique perspective on the state of compensation, as it is completed by financial executives, rather than by human resources or executive search firm executives.

"The survey results demonstrate that the downturn's wrath has not neglected the C-Suite in terms of compensation, as we continue to see that the majority of financial executives have not received a salary increase," said Marie Hollein, President and CEO for Financial Executives International (FEI). "As companies are forced to continue making cuts to their bottom line, it is very alarming that the median number of finance and accounting employees at public companies has plummeted from the 100-249 range to the 10-50 range, particularly at a time when increased regulation and complexity are requiring additional hours and manpower."

Private company finance functions reported much more stability than their public company counterparts in terms of staff levels.  An additional shift in compensation was evident when salary increases between private and public companies were compared.  While traditionally public companies have awarded higher salary increases, the average salary increase for public and private companies was identical for the first time in the four years this survey has been conducted.  

Salary & Bonuses

The estimated average base salary increase of all respondents is 2.1 percent - a further decrease from 2009's low of 3.7 percent. More than half of all respondents (57%) stated that they did not receive a salary increase in 2010.  While salary increases were the exception, virtually all public and private company CFOs (96 %) reported receiving a bonus this year.  The amount of respondents who received an additional cash-based long-term incentive award increased for the first time in the four years the survey has been conducted.  For the fourth year in a row, the base salaries of public and private company CFOs remained proportionate to companies' annual revenues.

• Public company CFOs: For public company CFOs, the average base salary for 2010 is $285,000, a decrease from the prior year's survey ($296,800).  
  • After factoring in bonuses and long-term cash incentives, the average total cash compensation is $480,877.
  • Adding stock-based compensation, retirement and perquisites, the average total compensation is $680,407.
  • Bonuses for public company CFOs vary across the board.
  • While a fraction reported no bonus, about eight percent of respondents reported a bonus that exceeds 100 percent of their base salary.

• Private company CFOs: For private company CFOs, the average base salary for 2010 is $204,800, an increase from the prior year's survey ($199,600).
  • After factoring in bonuses and long-term cash incentives, the average total cash compensation is $285,044.
  • Adding stock-based compensation, retirement and perquisites, the average total compensation is $367,311.
  • Bonuses for private company CFOs also varied across the board.

Beyond the Paycheck

“Similar to what we saw in 2009, financial executives are exhibiting diversity in the type of awards packages they are receiving,” said Cheryl de Mesa Graziano, Vice President, Financial Research and Accounting Policy for FERF.  “Interestingly, we noticed that fewer financial executives have employment contracts this year, which may demonstrate a shift in their tenure at their current companies.”

Key 2010 survey findings on areas of non-salary and bonus compensation include:

Retirement

• Three out of four respondents (76%) participate in a defined-contribution plan offering an employer match.  Though the total number of employees participating in these plans decreased slightly from 2009 (80%), the average employer match increased to 4.2 percent for public companies and 3.8 percent for private companies (from 4% and 3.6% respectively in 2009).
• The majority of financial executives surveyed (67%) stated that they do not participate in defined benefit plans, or their companies do not have a plan.
• The number of executives who do not receive additional retirement benefits dipped to 79 percent (compared with 84 % in 2009).

Long-term incentives

• The percentage of respondents receiving a long-term cash incentive (based on other calculations or in the form of deferred compensation) increased this year for the first time in the four years the survey has been conducted (up to 27% from 18% in 2009).
• 54 percent received some form of stock-based incentive compensation, with stock options as the most cited type of award (30%).

Performance measures

• For public company respondents, the most prevalent performance measures used to determine annual compensation continue to be company goals and objectives.
• Thirty-three percent indicate they use discretionary performance measures to determine compensation, and twenty-four percent rely on earnings before interest, taxes, depreciation and amortization (EBITDA).

Employment contracts

• The majority of this year's respondents do not have employment contracts (54%), revealing a slight shift from 2009, when only 46 percent did not have employment contracts.  
• For those who do have contracts, the most common element is the change-in-control severance (applies to at least 28% of those with employment contracts).

Perks

• The percentage of respondents who receives perquisites remains consistent with prior years, with cell phones as the most common benefit for the fourth consecutive year (76% of financial executives receive).

Detailed figures for base salary, bonuses, long-term and stock-based compensation, retirement benefits and perquisites are available online through PayCheck, FEI's online search tool. Responses can be searched based on all criteria, including title, company type and company size. PayCheck is available on the FEI website: http://www.financialexecutives.org/eweb/DynamicPage.aspx?site=_fei&webcode=ferf_pub_detail&prd_key=06490f0a-4bc0-4901-8b6e-0cf8f5e9df30.

Results are free for FEI members, and non-members can purchase the survey results for $129, by visiting the FERF bookstore online at www.ferf.org/bookstore.

About FEI and FERF

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. Visit www.financialexecutives.org for more information.

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.

SOURCE Financial Executives International