Senior-level financial executives at public and private companies alike reported consistent trends in the levels and sources of their compensation in 2016, with average salary increases of 4.1 percent, up from 4.0 percent last year. This is according to the Financial Executive Compensation Report 2017 issued by Financial Executives Research Foundation (FERF), the independent, non-profit research affiliate of Financial Executives International (FEI), and Grant Thornton LLP, a leading professional services firm.
This year’s report discusses compensation trends for senior financial leaders and the risk management implications of incentive programs, while also examining the growing recognition of the relationship between compensation programs and organizational risk.
“As several high-profile examples illustrate, improper alignment of compensation program design or governance can increase an organization’s financial, operational, regulatory and reputational risks,” said Andrej Suskavcevic, CAE, President and CEO of Financial Executives International and Financial Executives Research Foundation.
Suskavcevic stresses the importance of properly managing risks in incentive programs. “Whether from misaligned incentives prompting inappropriate behavior that exposes a company to financial risk, regulatory concerns or negative publicity, an organization’s compensation program can have significant effects on its risk profile.”
“It’s key for organizations to properly incentivize the behaviors they’d like their executives to exhibit,” said Ken Troy, a director in Grant Thornton’s Human Capital Services practice. “An incentive plan can be looked at as a communications plan in that it outlines the expectations and goals an organization has for its executives. If executives are out of alignment with strategy or with common practice, you tend to get behaviors that can lead to risk issues.”
The report also found that only half (55 percent) of respondents are satisfied their organization’s incentive programs reflect risk considerations appropriately, and nearly twothirds (61 percent) say their risk management or finance function has not undertaken a comprehensive risk-focused review of their compensation programs.
Other key findings include:
• To attract and retain top talent, 33 percent of respondent companies offer sign-on bonuses, with the most common offering a cash bonus, followed by a combination of cash and restricted stock or options.
• Forty-four percent of respondent companies indicated that their board of directors makes pay decisions for all senior executives.
The report, based on survey responses from FEI members, examines self-reported salaries, staffing levels, variable pay, benefits and other key compensation-related benchmarks. The report can be found at www.ferf.org/reports.
‘It’s key for organizations to properly incentivize the behaviors they’d like their executives to exhibit.’
Financial Executives Research Foundation (FERF) is the non-profit 501(c)(3) research affiliate of Financial Executives International (FEI). FERF researchers identify key financial issues and develop impartial, timely research reports for FEI members and nonmembers alike, in a variety of publication formats. FERF relies primarily on voluntary tax-deductible contributions from corporations and individuals, and publications can be ordered by logging onto http://www.ferf.org/reports.
Financial Executives International is the leading advocate for the views of corporate financial management. Its more than 10,000 members hold policy-making positions as chief financial officers, treasurers and controllers at companies from every major industry. FEI enhances member professional development through peer networking, career management services, conferences, research and publications. Members participate in the activities of more than 65 chapters in the U.S. and a chapter in Japan. FEI is located in Morristown, NJ, and Washington, D.C. Visit www.financialexecutives.org for more information.
Founded in Chicago in 1924, Grant Thornton LLP (Grant Thornton) is the U.S. member firm of Grant Thornton International Ltd, one of the world’s leading organizations of independent audit, tax and advisory firms. Grant Thornton, which has revenues in excess of $1.6 billion and operates 59 offices, works with a broad range of dynamic publicly and privately held companies, government agencies, financial institutions, and civic and religious organizations.
