Mid-Market Executive Pay Shows Momentum

CEO and CFO compensation reflects a ‘modest but positive year’

By Stephen Miller, CEBS Nov 29, 2016
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CEO compensation at middle-market U.S. companies rose by 3.2 percent last year to an average of $3.8 million, and CFO compensation rose by 4.1 percent to an average of nearly $1.5 million.

The BDO 600: 2016 Survey of CEO and CFO Compensation Practices of Mid-Market Public Companies report, released Nov. 15, examined CEO and CFO compensation at publicly traded companies with annual revenues from $100 million to $3 billion. The study used proxy statements filed between March 2015 and March 2016.

While the increases are moderate, mid-market executives fared better than employees overall, who received an average 2.9 percent salary increase in 2015.

"Executives at middle-market companies are cautiously bullish," said Randy Ramirez, managing director in the global employer services practice at accounting and consulting firm BDO USA, which conducts the annual survey. "Compensation increases reflect a modest but positive year, and despite a few economic challenges and uncertainty around election outcomes, 2016 growth may even be better."

Among the findings for 2015 total compensation:

  • Technology and health care CEOs were the highest paid among the eight industries analyzed. Amid continued investor and consumer scrutiny, financial services—banking CEOs were the lowest paid, despite reporting the highest increase in pay from the prior year.

  • The majority of CEOs' pay packages—63 percent—came in the form of long-term incentives, emphasizing the importance of performance. CFO pay was more evenly split—with 55 percent in long-term incentives and 45 percent in annual cash.

  • Total compensation for CFOs averaged about 38 percent of total CEO pay.


Mid-Market CEO and CFO Pay

2015 total compensation and percentage change from 2014

Sector CEO Pay Change CFO Pay Change
Technology$5,691,65219%$2,006,87313%
Health care$5,068,7272%$1,667,624-5%
Real Estate$5,052,0960%$1,910,6584%
Energy$4,197,580-4%$1,806,917-6%
Financial Services—Nonbanking$3,632,5866%$1,291,575-6%
Manufacturing$3,214,7502%$1,237,2409%
Retail$2,968,313-4%$1,255,81238%
Financial Services—Banking$751,1748%$388,6518%
Source: BDO USA.

"Executive compensation plans continue to be hotly debated as industries like financial services and health care grapple with increased scrutiny from stakeholders, lawmakers and consumers, with continued calls for even more transparency," said Ramirez. "We expect performance metrics will continue to grow in importance, as will communication plans to help earn shareholder approval."

[SHRM members-only toolkit: Designing Executive Compensation Plans]

Higher Pay and Higher Risk in Larger Companies

While total compensation is highest at larger companies in the middle-market space, so too is the proportion of variable compensation in the form of bonuses, stock and long-term incentives:

*Among larger companies in this space, just 15 percent of CEO pay is salary versus 24 percent at smaller mid-market companies.

*For larger mid-market CFOs, 22 percent of pay is salary versus 34 percent at smaller companies.


CEO and CFO Pay in 2015 by Company Revenues


Company Size CEO Pay CFO Pay
$100 million - $500 million$2,324,230$964,824
$500 million - $1.25 billion$4,035,853$1,425,502
$1.25 billion - $3 billion$5,187,866$1,994,808
Source: BDO USA.

 

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