Melanie C. Nolen

Melanie C. Nolen
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Melanie is research editor for Corporate Board Member and Chief Executive. She has two decades of experience writing for the corporate and financial industry across Canada and the United States. She is based in Nashville, Tennessee.

CEOs Find Renewed Optimism Amid Disruption in Washington

CEO confidence in business conditions over the coming year has rebounded to January levels, although some note anxiety over the pending election.

Beyond Talent Acquisition: Rewarding Performance to Motivate Growth

This is the second in a series on executive compensation, based on findings from our exclusive 2019-20 CEO & Senior Executive Compensation Report for Private Companies, which gathers data from more than 1,600 private companies. It is the most authoritative resource in the U.S. for private company executive pay. Part 1 is here. With an unemployment level near 50-year lows, having a robust talent strategy is a must, and a core element of this strategy is competitive pay. It is imperative for companies looking to retain their best talent to offer a compensation plan that is not only competitive but also rewarding and motivating. Yet, more than half of small and lower-middle-market companies (annual revenues less than $100 million) don’t have a formal salary plan with regularly scheduled reviews—a component of a compensation plan that provides incentive and, thus, motivation to employees to achieve their objectives and continue to develop the skills that will enable them to grow both inside and outside the company. That’s one of the key findings of our most recent CEO & Senior Executive Compensation Report for Private Companies, for which Chief Executive Research surveyed more than 1,600 private companies from April through June of 2019 about their 2018 fiscal year and expected 2019 compensation levels and practices.

2020 Private Company Comp ReportJust Released: Chief Executive's 2019-20 CEO & Senior Executive Compensation Report for Private Companies. With data from over 1,600 private companies, it is the most authoritative resource in the U.S. for private company executive pay. Know more, pay smarter. Learn more.


What’s more, less than 30 percent of companies, across all sizes, use an objective formula to determine the size of pay increases, and that number drops to 18 percent for the smallest companies (less than $25 million in annual revenues). This lack of formal metrics can be a deterrent to some employees, who may find that the company isn’t sufficiently invested in rewarding their performance or promoting career growth. Rather, most companies surveyed reported monitoring local salary ranges to remain competitive—a strategy that is not without its flaws if it serves as the only (or primary) method for determining compensation. After all, attracting talent is only half the battle; retaining, developing and motivating a qualified workforce requires serious compensation considerations. And executives are mobile, so competition for executives goes beyond the local market. The survey also found that when assessing bonus payments, more small companies tend to leave it to management’s discretion compared to larger companies, which are more prone to using a formula. The accomplishment of performance objectives, however, remains a secondary criterion for determining bonus amounts, which can run counter to motivating employees, particularly when subjectivity takes precedence over a formula. In the end, compensation plans should be seen as “incentive” packages, which means they should be aligned to both company and individual performance. To do so, business owners and stakeholders must: 1. Determine what the priorities of the business are (e.g., increased cash flow, position for a potential sale or IPO, increase equity value, attract and retain top talent, etc.). 2. Develop a compensation philosophy as an extension of those priorities to achieve the pre-determined business goals. 3. Establish individual/team goals, defined time horizons to achieve those goals and success metrics to measure performance objectively. Most importantly, a compensation plan should share value that is created in the company to not only reward performance but also keep goals aligned, retain and attract talent, and accelerate value creation.

Executive Compensation 2020: The Most Important Thing Private Companies Should Do...

Compensation is one of the most strategic tools companies have at their disposal to attract top-notch talent, retain best performing executives and motivate the leadership team to achieve their objectives. In this era of near-record low unemployment and constant disruption, talent strategies are critical to success. Yet, while most private companies spend a significant amount of money on executive compensation, they are not spending it optimally, according to Chief Executive’s annual compensation research of more than 1,500 companies.

2020 Private Company Comp ReportJust Released: Chief Executive's 2019-20 CEO & Senior Executive Compensation Report for Private Companies. With data from over 1,600 private companies, it is the most authoritative resource in the U.S. for private company executive pay. Know more, pay smarter. Learn more.


For instance, while the best-performing companies use incentive-based compensation, 70 percent of companies with less than $50 million in revenues and 36 percent of companies with more than $100 million in revenues (which most would expect to be more “sophisticated”) still do not have formal long-term incentive plans. Further, more than half of the private companies that participated in the study report not having their company value appraised at regular intervals, meaning their senior executives have no idea what their equity-linked incentives are truly worth. Having robust compensation plans that account for the current and future environment and that understand the difference between motivating talent to deliver outstanding vs. average performance is crucial to gaining and maintaining a competitive edge. While median base salaries do not fluctuate significantly year over year, variable play and top-quartile numbers play a focal role in the talent acquisition-retention game, particularly for companies with more than $100 million in revenues. The same is true of companies in certain industries, such as finance, real estate and biotech, where the bonus alone accounted for nearly half of the cash compensation in 2018 and, in some cases, is expected to surpass the base salary in 2019. What to do if you’re a family business or someone who can’t offer long-term equity? A few suggestions: • Be more generous on salaries and long-term bonuses. • Come up with long-term incentive program alternatives to equity, such as synthetic equity. In this case, you can approximate stock, a stock plan or an option plan. • Mix in short and long-term bonuses plans based on performance. The most important rule: Whatever you do, make sure your plan aligns with the long-term goals of the company. And make sure you’re loud and clear in communicating the value—whatever it is—to your team. More detailed information about compensation packages for CEOs and nine other senior executive positions, their base salaries, bonuses, equity grants and gains, benefits, perks and company compensation policies and practices, as well as how these elements vary by title, company size, industry, ownership type, geographic region and other key variables, is available in Chief Executive’s 2019-20 CEO & Senior Executive Compensation Report for Private Companies. For additional information about the report, contact Chief Executive’s research director, Melanie Nolen, at mnolen@ChiefExecutive.net.

Washington Politics Cramps CEO Confidence In October Poll

Chief Executive’s October polling of CEOs found confidence in both the current and future business environment stagnating amid heightened political and economic uncertainty at home and abroad.  CEO confidence in current business conditions remained relatively flat throughout the third quarter, and October is a continuation of this trend, with CEOs rating the economic climate at 6.8 out of 10 on our 1-10 scale. CEOs’ outlook for the next 12 months has been showing some sign of improvement—revenue and profit expectations rebounded in October after a steady decline through the third quarter—but despite having clawed back some of the steep August losses, our leading indicator remains 9 percent behind October 2018 levels and 7 percent below this year’s peak. october 2019 ceo confidence indexNote: Chief Executive’s CEO Confidence Index is measured on a scale of 1-10. October poll had 296 responses. The reason? Overwhelmingly, CEOs we surveyed say Washington politics is ruining an otherwise positive climate for business. Solid consumer spending, low unemployment and declining interest rates, coupled with reduced regulations and lower taxes have been energizing companies across the country, but CEOs say they can’t take full advantage of it because they don’t know what’s around the corner. Thanks to this uncertainty, the proportion of CEOs expecting to increase their capital expenditures over the next year continues to hover at multi-year lows, at 46 percent. Surveyed CEOs cite the upcoming presidential election, unresolved trade issues and continuous chatter about a looming recession as major hurdles preventing businesses from deploying cash, alongside fears of growing momentum for “socialist” programs among Democratic presidential candidates, which they say could have dire consequences for business. “Politics [are] very draining,” says the CEO of a global enterprise who prefers to remain anonymous. “Add in the election, and you get very uneasy about how to position your company. We will adjust no matter who the president is, but Congress has just as big an influence with their constant impasse.” “The Democrat-controlled U.S. House needs to stop wasting time on impeachment and get to business on passing USMCA and dealing with immigration,” says Robert Koch, chair of Koch Enterprises, an upper-middle-market global industrial manufacturer, who says the strike at GM, unsettled trade agreements and the House’s focus on impeachment have caused temporary business slowdown. “A month ago, my assessment would have been higher,” explains the CEO of a professional services firm in the Northeast. “But the vengeful political climate (regardless of affiliation) is non-productive, harmful to business growth and looks to derail progress that has been made.”

Sluggish Outlook

Overall revenue and profit expectations are up from the month prior, although they remain far behind their earlier levels. Plans to increase headcount remain somewhat flat, with 46 percent of CEOs projecting to hire over the next 12 months, compared to 44 percent in September.

Wins and Losses Across Industries and Sizes

CEOs’ outlook for the year ahead has rebounded in October from the previous months, but it remains depressed across most industries and well below 2018 levels. For a second consecutive month, Transportation CEOs, often the first to be impacted by downturns in the economy, tellingly remain the least confident in the future, with a rating down 22 percent since the same time last year. Leaders in this sector say the roiled oil market is a big factor in their rating, in addition to political turmoil and uncertainty for 2020. We observe a similar scenario when looking at CEO confidence by company size, with all groups down from 2018 levels but up from the month prior.

About the CEO Confidence Index

The CEO Confidence Index is America’s largest monthly survey of chief executives. Each month, Chief Executive surveys CEOs across America, at organizations of all types and sizes, to compile our CEO Confidence Index data. The Index tracks confidence in current and future business environments, based on CEOs’ observations of various economic and business components.   

Despite Leadership Concerns, Trump Still Seen As Most Positive Candidate for...

Trump trade tactics play well with manufacturing CEOsDespite deep antipathy towards his leadership style and concern about the growing impact on the economy of his trade disputes, an October poll of U.S. CEOs found that President Trump remains far and away their best hope for business growth among current candidates, with Democrats trailing far behind. When asked which of the current candidates for president would have the “most positive impact on your business" if elected, President Trump was the top pick of 70 percent of those polled, despite many CEOs saying he is hardly their candidate of choice—but rather the candidate who would be least detrimental to their business. Former Vice President Joe Biden came in second in the poll of 296 CEOs, with 19 percent. No Democrat aside from Biden registered more than single-digit support. “It's not even a close call. Between Warren, Sanders, Buttigieg and Harris, there is not even a scintilla of evidence that there would be any positive impact,” says the president of an industrial manufacturing company. “Biden would be the least damaging of the remaining group. But Trump’s economic success completely dwarfs what meager growth the Obama/Biden Whitehouse was able to muster.”

Bad Choices All Around

One thing many CEOs we polled agree on: When it comes to the current candidates, “There is not a great choice for business among them,” says the president of an industrial manufacturing company who sees trade disputes, a European slowdown and political dysfunction as the main obstacles to a positive business climate in the year ahead. “Trump managed to push through a number of pro-business changes, but they have now been dwarfed by trade disputes and lack of clear direction on policy," he says. "It will be a detriment if he is re-elected. The democratic slate of candidates is likely to re-establish regulations which hamper business and introduce tax policy which will thwart investment. Of the list, Biden is the least impactful.” The chairman of a global industrial manufacturer agreed. “In reality none of the above will really help business in near term. It will take years to unwind from where we are." He selected Joe Biden in the poll. “While Trump is the choice for the most positive impact from an economic policy perspective, I am hopeful he will not be re-elected. I am willing to sacrifice a little economic prosperity to see him out of office,” says the CEO and president of an international media company. “Neither party has a pro-business policy," says the owner and managing partner of a global professional services firm. "We need a Michael Bloomberg, Steve Forbes, Mitt Romney.”

Breakdown By Industry

Health Care, Industrial Manufacturing and Financial Services CEOs ranked Trump the highest for the economic policies that would be most helpful to their business. Transportation CEOs were the most divided between Trump and Biden, at 57 percent vs. 43 percent, respectively.

U.S. CEOs Don’t Expect A Recession Anytime Soon

CEOs say they are still concerned with the volatility and uncertainty of global and domestic politics but find confidence in stable macroeconomic fundamentals and remain hopeful for progress on China-U.S. trade talks.

CEO Confidence Plunges In August Amid Growing Trade Worries And Slowdown...

CEO confidence in future business conditions fell 6% in August from July, according to Chief Executive’s most recent polling. At 6.2 out of 10 on our 1-10 scale, confidence is at its lowest level since October 2016.

CEOs Slow Spending Amid Uncertainty

The majority of the 255 CEOs we surveyed for our CEO Confidence Index said they are no longer planning on increasing capital expenditures or headcount over the coming year.

CEO Confidence Plunges On Tariff Fears In June

Amid announcements of new tariffs on China and, at the time of polling, Mexico, CEOs’ outlook for future business conditions plunged 6 percent from May to June, according to Chief Executive’s most recent reading of CEO confidence.

CEO Confidence Rebounds In May Despite Escalation Of U.S. Trade Fight...

President Trump’s escalation of the trade fight with China may have spooked global markets, but U.S. CEOs are taking it in stride so far, according to Chief Executive’s monthly reading of CEO confidence.
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CEO CONFIDENCE INDEX

CEOs Find Renewed Optimism Amid Disruption in Washington

CEO confidence in business conditions over the coming year has rebounded to January levels, although some note anxiety over the pending election.
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