Executives report pay increases, say incentives are good retention tool


By By Neil Amato

More than 60% of executives who receive long-term incentives believe the incentives motivate them to remain at their current company, according to a new global survey.

A majority of executives have seen pay increases in the past year, including 44% who are at the CEO or president level, according to an annual report by the Association of Executive Search Consultants.

The global survey of 907 executives showed that 61% said that incentives motivate them to remain at their current company. A smaller number, 54% of those who receive incentives, said the incentives motivate them to higher levels of performance.

Executive searches can be expensive, so having incentives in place to retain C-suite employees is important for continuity and for a company’s bottom line. Research estimates show the cost to replace a worker begins roughly at 20% of that worker’s salary and can be much higher for harder-to-fill executive positions.

Of CEOs who had a rise in total compensation, 17% received pay bumps of 16% or more in the last fiscal year. Twenty per cent received increases of between 11% and 15% in total compensation, 34% received increases of between 6% and 10%, and 29% of CEOs received increases of between 1% and 5%.

For other positions in the C-suite, the bulk of increases were 10% or less. But a greater number of those not in the CEO’s chair saw total compensation increase. For example, 62% of executives just below the CEO received increases in total compensation, 65% of vice presidents did, and 66% of directors or other executives did.

Among the non-CEOs, about 25% said their total compensation remained the same, and about 10% said their total compensation decreased. One notable drop among those that reported decreases: 55% of those at the CFO or other C-suite level below CEO reported decreases of 16% or more.

Eighty per cent of CEOs work under an executive employment contract, while less than half of those below the CEO level have such a contract. The respondents said some of the topics addressed in employment contracts are severance, change-in-control severance, minimum or guaranteed level of compensation, and housing and other living expenses.

“There is no doubt that, as businesses are now in growth mode, top talent is highly valued and sought after,” Karen Greenbaum, the CEO of the Association of Executive Search Consultants, said in a news release.

Related CGMA Magazine content:

Why Investors Target the Executive Pay Gap”: A global survey conducted by Harvard Business School on the gap between executive compensation and unskilled workers’ wages offers answers to why shareholders are baulking at CEO pay.

US CEO Pay Grows at Higher Rate Than CFO Pay”: Compensation for US chief executives is growing at a faster rate than compensation for CFOs, according to 2014 research by BDO. The energy sector had the highest pay rises for executives, and average pay in the retail sector dropped for CEOs and CFOs.

Neil Amato (namato@aicpa.org) is a CGMA Magazine senior editor.

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