Executive Benefits
Benefits Benchmarking
Executive Benefits Benchmarking Can Help in Addressing Executive Pay Gaps
Executive Benefits Benchmarking Can Help in Addressing Executive Pay Gaps
Author Executive Benefits Team
Date July 5, 2022
Using benefits benchmarking to help organizations and compensation committees address executive pay disparities.
A recently released report from ISS Corporate Solutions identified an increasing gap in the executive pay of U.S. CEOs and U.S. CFOs. The report, “U.S. CEOs Widen Pay Gap with CFOs,” examined the growing disparity between the cash and equity compensation received by the Chief Executive Officer and the compensation received by the Chief Financial Officer in the same organization.
“Pay levels for CFOs are a matter of careful consideration for compensation committees, especially as large internal pay differentials may be indicative of potential succession-planning issues.”
The report takes a deep dive and examines dollar differences in pay amounts, median CFO pay as a percentage of CEO pay, and median CEO pay as a multiple of CFO pay. Perhaps not surprising is that the gap between CEO pay and CFO pay is widest among larger companies.
Total Rewards is More than Cash and Equity Compensation
The ISS report provides interesting insights. However, it focuses only on the cash and equity compensation of the CEO and CFO.
While these two components of compensation are obviously significant, a Compensation Committee should always also look at the value of the Total Rewards package. Total Rewards go beyond cash and equity and include qualified and nonqualified retirement benefits. As the Executive Benefits Team has been known to remind clients, “if retirement benefits aren’t compensation, then what are they?”
Executive Benefits Benchmarking Delivers Meaningful and Often Overlooked Insights for Compensation Committees
Compensation consultants generally do not quantify the value of retirement benefits in calculating the value of an executive’s Total Rewards package. Our Executive Benefits Team helps companies benchmark the value of their retirement benefits against their peer group by:
- Calculating the present and future values of the benefits package over a career. Plans may seem comparable until you scrutinize the hard numbers over the long haul.
- Quantifying the value of the company contributions to a benefits package as paid out throughout retirement, comparing total compensation for peer groups, analyzing retirement contributions, and providing insights on all executive benefits and perquisites.
Nonqualified deferred compensation plans can offer an effective and affordable strategy to help organizations reward and keep valued employees. But before an organization makes any adjustments to executive pay, it should first be sure it is armed with accurate insights. For clarity in benchmarking Total Rewards, we invite you to contact any member of the executive benefits team.
The complete ISS Corporate Solutions paper is available for download in the ISS Corporate Solutions (ICS) online library.
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