Does your Mid-Market C-Suite Compensation Stack Up Against your Peers?

As mid-market companies continue to leverage executive talent to drive growth, they're increasing compensation and using more pay-for-performance options.

Compensation for public-company CEOs at mid-market companies rose 3.2% in 2015. The average compensation for CEOs and CFOs at public mid-market companies was $3.8 million and $1.5 million respectively. Continuing the trend of pay performance, 63% of CEO pay in 2015 was derived from long-term incentives such as bonuses tied to stock price performance.

“Executives at middle-market companies are cautiously bullish,” said Randy Ramirez, Managing Director in the Global Employer Services practice at BDO USA, LLP, which produced the study. Compensation increases reflect a modest but positive year, and despite a few economic challenges and uncertainty around election outcomes, 2016 growth may be even better.”

The BDO survey found that CEO and CFO compensation varied widely by sector. Matching trends throughout the economy, tech companies are seeing the strongest results in growth and executive compensation. Technology CEO and CFO pay surpassed other industries in 2015, growing 19% to $5.7 million and 13% to $2 million, respectively. The banking sector, where executive pay has been under scrutiny for almost 10 years, saw the second largest increase at 8%. Mid-market CEO pay in both retail, energy and real estate either declined or remained flat.

“Executives at middle-market companies are cautiously bullish.

The National Center for the Middle Market’s Executive Compensation Benchmarking Tool allows organizations, and candidates, to see average compensation for industries and companies by size.

One interesting trend is that, since at least 2013, CFO pay has been rising at a faster rate than CEO pay. The reason is, financial executives now help CEOs execute broader strategies such as acquisitions and navigate the regulatory landscape. CFOs in retail, technology and manufacturing ranked highest. They saw their compensation rise by 38%, 13% and 9%, respectively.

Martin Zwilling, founder and CEO of Startup Professionals, said the CFO role is rapidly changing. He points to Twitter and GrubHub as examples where CFOs have recently been asked to absorb COO responsibilities. Today, he noted, CFOs are critical strategists in the digital age and are well-positioned to lead the charge. They are increasing their value because they can measure what is valuable, report it to their management team and board, and allocate capital to get investor buy-in and support.

Ramirez said executive compensation plans continue to be hotly debated as industries like financial services and healthcare deal with increased scrutiny from stakeholders and lawmakers. “We expect performance metrics will continue to grow in importance, as will communication plans to help earn shareholder approval,” said Ramirez.

Of course, CEOs of companies not listed on the stock market are typically paid a lot less. Private company CEOs received a median total compensation package of $354,750, including bonuses and equity grants, according to Chief Executive’s 2016-2017 CEO Senior Executive Compensation Report for Private Companies. Among private companies with under $10 million in revenues, financial industry CEOs had the highest median compensation packages. Among companies with over $100 million in revenues,  tech CEOs had the highest median compensation packages.

Regional differences were a secondary factor in private company CEO compensation, the report said. CEOs and senior executives in major metro markets enjoyed richer median compensation packages than their colleagues in small and rural markets.

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