Companies Shelling Out More Money to Finance Executives
US finance executives at both private and public companies are the beneficiaries of salary increases that are slightly higher than what the marketplace is offering, suggesting that employers are more confident in the compensation packages they are providing to key contributors within their organizations, according to results of a new survey from accounting firm Grant Thornton LLP and the Financial Executives Research Foundation (FERF), the research arm of Financial Executives International (FEI).
The Financial Executive Compensation Survey, now in its eighth year, reports the salaries, bonuses, long-term incentives, and retirement benefits of finance executives in the United States. For this year’s study, 490 active members of FEI were polled.
In 2014, the average salary increase for finance executives – such as CFOs, controllers, and treasurers – at private companies is 3.3 percent, up from 3.1 percent a year ago. At public companies, the rate of increase fell slightly – from 3.5 percent in 2013 to 3.4 percent this year. These numbers are a tad higher than the overall salary increases in the marketplace, which are trending at 3 percent, according to the survey.
“Financial executives serve a vital role within their organizations, and it’s not surprising that companies are reinforcing their finance and accounting teams,” FEI President and CEO Marie Hollein said in a written statement. “Competitive compensation packages for the finance function will offer new opportunities for those in the profession and assure companies have the best talent.”
The average base salary for public company CFOs in 2014 is $273,100; $215,200 at private companies. Among all finance executives, at an average of $276,000, chief accounting officers had the highest base salary at public companies, while treasurers had the highest base salary at private companies at $258,800.
But Ken Troy, a director in Grant Thornton’s Compensation and Benefits Consulting practice in Los Angeles, said there’s more to compensation plan design than salary and bonuses.
“Benefits, perquisites, long-term incentives, and employment contracts are important parts of an effective total compensation package and will be even more important in an increasingly competitive market,” Troy said in the survey report.
For example, 77 percent of both public and private company respondents have a defined contribution plan. In addition, less than a quarter of their companies have a defined benefit plan. For those companies that do still offer a defined benefit plan, approximately half restrict new entrants or have frozen benefit accruals. For companies that cover total health care costs, the average percentage paid by the employer was 71 percent.
Of the 81 percent of executives who reported receiving one or more perquisites, the most popular was cellphone, cellphone allowance, or cellphone reimbursement (85 percent), followed by company car or car allowance and paid parking, both at 19 percent. Ninety percent of respondents said those perquisites have not been reduced in the past year.
The survey also found that more people are being hired to fill corporate finance staff positions. At private companies with 250 to 499 employees, the number of finance and accounting employees increased to 8 percent in 2014 from 4 percent in 2013. Finance employment also increased at private firms with 500 to 999 employees – from 2 percent a year ago to 4 percent this year.
Public companies with more than 5,000 employees saw a huge surge in hiring for finance positions, up 19 percent over last year.
“Organizations have been hesitant to hire, and they’ve been asking employees to do more with less and hiring contractors,” Troy noted in the report. “Employees were happy to have a job and understood the need for benefit cuts and other belt-tightening. But now that the economy is improving, organizations are growing and beginning to staff up to the levels before the downturn, in part to retain people who have been working so hard.”
About the survey:
The data for the Financial Executive Compensation Survey was compiled from responses received from a 31-question survey sent via email to active members of FEI between November 2013 and January 2014, with 490 members completing the survey. An active or executive FEI member is defined as an individual currently holding a position as a financial executive at an organization.