Incentives important in US finance executives’ compensation

Incentives played a significant role in US financial executives’ compensation as salary raises and some base salaries were less generous this year than last year, according to an annual survey by Grant Thornton and the Financial Executives Research Foundation.

The seventh annual survey addressed 2013 salaries, bonuses, long-term incentives and retirement benefits of US financial executives at private and public companies. Of the 554 CFOs, corporate controllers, finance directors, treasurers and chief accounting officers polled, nearly 70% reported having an annual target bonus level. Eighty per cent of public company CFOs said they received stock-based, long-term incentive awards, compared to 39% of private company CFOs.

The estimated average salary increase for all financial executives was 3% this year, compared with 4% in 2012. Also, fewer respondents received an annual salary increase in 2013, but this year’s 72% was still much higher than the survey’s all-time low of 43% in 2010. 

“As the economy improves, organisations will be faced with challenges of attracting, retaining and engaging the best financial executive talent available to ensure success,” Marie Hollein, president and chief executive of Financial Executives International, said in a news release. “Whether private or public, company boards and top leadership will need to balance being employers-of-choice and ensuring their executive compensation programmes are aligned with constituents’ expectations.”

Other findings of the 2013 survey included:

• The average base salary of CFOs at public companies was $248,900, down 13% from 2012. Private-company CFOs received an average base salary of $201,700, up 2% from 2012.
• Twenty-two per cent of the finance executives said they received long-term cash incentives, but 46% reported receiving some form of stock-based incentive compensation. Long-term incentives were most frequently tied to performance measurements that aligned with a company’s goals and objectives.
• Defined benefit plans are not offered at 74% of respondents’ companies.
• Employees must contribute a portion of the total health care costs at 49% of the companies.
• Eighty-two per cent of respondents reported receiving perks. The most popular perks are cellphone reimbursement (77%), followed by airline club membership (22%), company car or car allowance (18%) and paid parking (16%).
• Sixty-three per cent of respondents said they are not covered by an employment contract.
• On average, respondents have held their current position for at least five years.

Related CGMA Magazine content

“More Financial Executives Are Getting Raises – and the Raises Are Bigger”: More US financial executives said they were getting raises last year. And the pay bumps were getting bigger – a sign that, some said, was proof the economy was turning around. Also, raises in the future may increasingly be tied to performance, research indicated.

—Sabine Vollmer (svollmer@aicpa.org) is a CGMA Magazine senior editor.