Getting CEO Compensation Right

While the majority of private companies understand the value of incentive-based compensation, most still fail to harness their potential, according to Chief Executive’s recent CEO and Senior Executive Compensation Report for Private Companies.

Incentive-based compensation can play a powerful role in a private company’s competitive strategy, agreed the majority of private company executives participating in a recent Chief Executive survey. Yet, a surprising number of companies lack formal annual incentive plans for executives. Among privately owned companies with between $5 million and $9.9 million in revenue, just 42.6% of participants reported having such a plan. Incentive-based compensation is far more prevalent among larger companies, with a full 81.3% of $1 billion-plus companies tying pay to performance in a formal, structured way.

In addition to company size, type of ownership seems to play a significant role in the use of such programs. Private equity and venture capital-backed companies, which tend to have management with broader operational experience, are more likely to use formal annual incentive-based programs, with 82.8% and 82.4 percent, respectively, having such plans. The figures among sole proprietorships (56.6%), partnerships (54%) and family-owned businesses (65%), are significantly lower.

The bottom line? Smaller firms and those with “homegrown” leadership may be missing out on potent pay-based tools for attracting, retaining and motivating executives. These charts offer additional insights on the pay practices currently in use by today’s private companies, as well as best practice approaches to compensation private sector firms should consider.


Comp 1


Comp 4


Comp 2


Comp 5


Comp 6


Comp 7Comp 8


MORE LIKE THIS

  • Get the CEO Briefing

    Sign up today to get weekly access to the latest issues affecting CEOs in every industry
  • upcoming events

    Roundtable

    Strategic Planning Workshop

    1:00 - 5:00 pm

    Over 70% of Executives Surveyed Agree: Many Strategic Planning Efforts Lack Systematic Approach Tips for Enhancing Your Strategic Planning Process

    Executives expressed frustration with their current strategic planning process. Issues include:

    1. Lack of systematic approach (70%)
    2. Laundry lists without prioritization (68%)
    3. Decisions based on personalities rather than facts and information (65%)

     

    Steve Rutan and Denise Harrison have put together an afternoon workshop that will provide the tools you need to address these concerns.  They have worked with hundreds of executives to develop a systematic approach that will enable your team to make better decisions during strategic planning.  Steve and Denise will walk you through exercises for prioritizing your lists and steps that will reset and reinvigorate your process.  This will be a hands-on workshop that will enable you to think about your business as you use the tools that are being presented.  If you are ready for a Strategic Planning tune-up, select this workshop in your registration form.  The additional fee of $695 will be added to your total.

    To sign up, select this option in your registration form. Additional fee of $695 will be added to your total.

    New York, NY: ​​​Chief Executive's Corporate Citizenship Awards 2017

    Women in Leadership Seminar and Peer Discussion

    2:00 - 5:00 pm

    Female leaders face the same issues all leaders do, but they often face additional challenges too. In this peer session, we will facilitate a discussion of best practices and how to overcome common barriers to help women leaders be more effective within and outside their organizations. 

    Limited space available.

    To sign up, select this option in your registration form. Additional fee of $495 will be added to your total.

    Golf Outing

    10:30 - 5:00 pm
    General’s Retreat at Hermitage Golf Course
    Sponsored by UBS

    General’s Retreat, built in 1986 with architect Gary Roger Baird, has been voted the “Best Golf Course in Nashville” and is a “must play” when visiting the Nashville, Tennessee area. With the beautiful setting along the Cumberland River, golfers of all capabilities will thoroughly enjoy the golf, scenery and hospitality.

    The golf outing fee includes transportation to and from the hotel, greens/cart fees, use of practice facilities, and boxed lunch. The bus will leave the hotel at 10:30 am for a noon shotgun start and return to the hotel after the cocktail reception following the completion of the round.

    To sign up, select this option in your registration form. Additional fee of $295 will be added to your total.