Executive and Director Compensation in ESOP Companies, 10th Ed.

Excerpts

From chapter 7, "Using Compensation Studies Wisely"

Once you have identified the appropriate dataset(s), the next task is to match your executive—often called an incumbent—against a similar position in the dataset. Be sure to focus on the job role and description here and not the title. As an example, some controllers function as CFOs, and some CFOs function more as controllers. Some studies will also provide detailed job-matching information, such as the scope of revenue responsibility for a division president. Match your incumbent’s responsibilities with the studies’ descriptions as closely as possible. As a rule of thumb, a job match is considered adequate if 70%–75% of the incumbent’s core responsibilities are captured by the matching job description. If your incumbent functions in more than one role, you can consider creating a hybrid role that is a blend of roles in the study and weight the reported compensation figures appropriately, but this can be subjective.

All of these approaches require judgment, but this is the inexact science of setting compensation. Even with a perfect job match in a seemingly perfect survey, the reported compensation figures should be the starting point for the committee’s deliberations. Your incumbent will differ in some respects versus those comprising the sample in the survey (tenure, experience, competitive environment for this position in your industry, and so on).

From chapter 8, "Findings from the 2024 ESOP Compensation Survey" (tables omitted)

Table 8-3 shows base pay, cash incentives, and stock-based incentives for each position, broken down by percentiles. Note that percentiles for each pay category are calculated among only those respondents that offer that pay category, and exclude respondents who entered a zero or left their response blank. For example, cash incentive pay for CEOs is $112,167 at the 50th percentile (the median), but this is the median among only those companies that pay cash incentives to their CEO.

Table 8-4 presents total pay amounts. To calculate total compensation, we summed base pay, cash incentive pay, and stock-based compensation for each executive at each company and then calculated percentiles. Deferred compensation is excluded from the total pay calculation. Note that some companies offer all three categories of compensation, while others do not; therefore, the total pay at a given percentile is not necessarily equal to the sum of the three corresponding compensation categories in the table.

Table 8-5 presents data on the makeup of total compensation. Base pay accounts for 73% of total compensation for the median CEO, while incentives make up 33% of total pay for the median CEO.