FEI Study: Significantly Fewer Financial Executives Report Pay Freeze in 2011

MORRISTOWN, N.J., May 19, 2011 /PRNewswire/ -- Executive compensation among financial executives is showing signs of improvement from the previous year, with significantly fewer executives reporting a pay freeze in 2011, according to findings from a survey released today and conducted by Financial Executives Research Foundation (FERF).  Those in the finance profession also report a boost in their average salary increases over 2010's reported low, while they continue to take on a vast amount of responsibilities in their roles.

The fifth annual Financial Executive Compensation Survey offers a year-over-year comparison of compensation for finance professionals. The study examines salaries, bonuses, long-term incentives and retirement benefits of more than 1,000 financial executives from both public and private companies, nearly half of which were CFOs.  Completed solely by the financial executives themselves, rather than human resources or executive search firm executives, the survey results provide a unique perspective on compensation trends in the finance function.

"This year's findings demonstrate improvements to compensation for the finance function that are very reflective of the gradual improvement seen in the broader economy," said Marie Hollein, President and CEO for Financial Executives International (FEI). "While companies will continue to maintain efficiencies, many are seeing opportunities to loosen some of the precautions they were forced to take before, such as pay freezes. Finance professionals are seeing unprecedented responsibilities added to their jobs, and the overall increase to their salaries demonstrate the increasing level of importance put on executives in these roles. "

Private companies continue to demonstrate more stability as it relates to the number of employees in the finance function. The median number of finance and accounting employees at both public and private companies continues to remain in the 10-50 range, and while private companies generally maintain leaner staff, this reflects the low range for public companies. However, finance professionals are on average overseeing 194 employees related to their job responsibilities.  CFOs have a growing list of job responsibilities and yet only 38 percent of public company CFOs report International Financial Reporting Standards (IFRS) as a task under their job descriptions in 2011, compared to 36 percent in 2010.

For the first time this year, financial executives were asked to gauge the level of impact that rising healthcare expenses will have on compensation. The majority of respondents (60%) do not expect increasing healthcare contributions and expenses to affect their overall compensation for 2011.

Salary & Bonuses

The estimated average base salary increase of all respondents is 3 percent – an increase from the 2.1 percent reported in 2010 - an all time low for the history of the survey. Only a third (34%) of respondents report not receiving a salary increase in 2011, compared with 57 percent of respondents who experienced a pay freeze in 2010.  Similar to the previous year, the base salaries of public and private company CFOs remain proportionate to companies' annual revenues.

• Public company CFOs: For public company CFOs, the average base salary for 2011 is $277,400, a decrease from the prior year's survey ($285,000).  
  • After factoring in bonuses and long-term cash incentives, the average total cash compensation is $443,800.
  • Adding stock-based compensation, retirement and perquisites, the average total compensation is $673,831.
  • More than two thirds of public company CFOs report receiving an annual bonus.
  • While bonuses for public company CFOs vary across the board, nearly 5 percent of respondents report a bonus that exceeds 100 percent of their base salary.

• Private company CFOs: For private company CFOs, the average base salary for 2011 is $206,900, an increase from the prior year's survey ($204,800).
  • After factoring in bonuses and long-term cash incentives, the average total cash compensation is $287,382.
  • Adding stock-based compensation, retirement and perquisites, the average total compensation is $316,638.
  • Seventy-four percent of private company CFOs report receiving an annual bonus. Bonuses for private company CFOs also varied across the board.

Beyond the Paycheck

"Outside of salary, many compensation measures such as retirement and perks remain consistent with the previous year," said Thomas Thompson, Jr., Research Associate for FERF and author of the survey.  "Last year, we saw the first increase in the number of executives that received a long-term cash incentive, but this number has now slightly retreated. Meanwhile, the number of financial executives without an employment contract continues to rise."

Related to areas of non-salary and bonus compensation, key findings from the 2011 survey include:

Retirement

• Three out of four respondents (75%) participate in a defined-contribution plan with a matching contribution from their employer, remaining relatively consistent with the amount that participated in the previous year (76%).  The average employer match is four percent for both public and private companies.
• The majority of financial executives surveyed (69%) 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 increased to 84 percent (compared with 79% in 2010).

Long-term incentives

• A quarter of respondents report a long-term cash incentive (based on other calculations, phantom shares or phantom equity rights, or in the form of deferred compensation), a slight decrease from the previous year (27%).
• More than half (52%) receive some form of stock-based incentive compensation, with the most cited type of award being stock options (39%), followed closely by restricted stock/units (27%).

Performance measures

• Public and private company respondents most commonly use company goals and objectives as the performance measure to determine annual compensation.
• Twenty-six percent of public company respondents and 19 percent of private company respondents indicate they use discretionary performance measures to determine compensation.

Employment contracts

• The majority of this year's respondents do not have employment contracts (59%), revealing an increase from 2010, when 54 percent did not have employment contracts.  
• For those who do have contracts, the most common element is the change-in-control severance (applies to 27% of those with employment contracts).

Perks

• The percentage of respondents who receive perquisites remains consistent with prior years, with cell phones as the most common benefit for the fifth consecutive year (78% of financial executives receive).

A full breakdown of all survey results is also available online through FEI's online benchmarking tool PayCheck. 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 by clicking on research on the FEI Web site www.financialexecutives.org.

Results are free for FEI members, and non-members can purchase the survey results for $249.00, 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