2012 CMA Compensation Survey

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Annual Survey for the CEO's of the Council of Manufacturing Associations.

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2012 CMA Compensation Survey

  1. 1. Current Developments in Association CompensationNational Association of Manufacturers Council of Manufacturing Associations July 12, 2012Charles W. Quatt, Ph.D.PresidentQuatt Associates, Inc.2233 Wisconsin Avenue, NWSuite 501Washington, DC 20007(202) 342 1000 x. 103cquatt@quatt.com
  2. 2. 2Discussion Topics National Association of Manufacturers Council of Manufacturing Associations Survey Trends Approaches to Market Pricing: Defining the Marketplace Using Survey Data Current Trends in Executive Compensation Governance Trends
  3. 3. 3 NAM CMA Survey Trends Participation has remained high in 2012 and has risen by 46% since the survey’s inception in 2009.
  4. 4. 4 NAM CMA Survey Trends Survey median budgets have decreased since 2009 due to increased number of data points.
  5. 5. 5 NAM CMA Survey Trends Among organizations that participated all four years; budgets dipped in 2010 but have recovered to prerecession levels.
  6. 6. 6 NAM Survey Trends among Four Year Survey Participants Change in Average Total Cash Compensation 2009-2012 (Among 22 Common Participants) Change/ 2009 Change/ 2010 Change/ 2011 Overall Change to 2010 to 2011 to 2012 2009 to 2012Chief Executive Officer -1.2% 1.8% 9.0% 9.6%Second Highest Paid -2.8% 5.0% 4.6% 6.8%Third Highest Paid 0.2% 3.6% 5.6% 9.4%
  7. 7. 7 NAM Survey Trends Overall Survey: Change in Average Total Cash Compensation 2009-2011 (All Participants by Budgetary Category) Less than $2.5 $2.5 to $7.5 Million Greater than $7.5 Million 2009-2010 2010-2011 2011-2012 2009-2012 2009-2010 2010-2011 2011-2012 2009-2012 2009-2010 2010-2011 2011-2012 2009-2012 Change Change Change Change Change Change Change Change Change Change Change ChangeChief Executive Officer 6.5% 4.5% -4.6% 6.4% 12.7% 5.2% 0.9% 18.8% -4.0% 3.6% 14.9% 14.5%Second Highest Paid 10.5% -7.7% 4.0% 6.8% 3.5% 5.1% -1.0% 7.5% 3.7% 6.4% 3.1% 13.2%Third Highest Paid 7.2% -3.8% 4.6% 8.0% 12.9% 0.0% 0.1% 13.0% -3.4% 15.3% 2.2% 14.1% Number of Participants by Budgetary Category 2009-2012 Less than $2.5 Million $2.5 to $7.5 Million Greater than $7.5 Million 2009 2010 2011 2012 2009 2010 2011 2012 2009 2010 2011 2012 Chief Executive Officer 18 27 23 28 15 18 23 20 16 14 16 21 Second Highest Paid 17 19 21 26 15 17 21 19 16 14 14 21 Third Highest Paid 14 17 20 23 15 15 21 18 16 11 13 20
  8. 8. 8 NAM Survey Trends CEO Incentive Compensation Awards as Percentage of Base Salary (All Participants and by Budgetary Category) All Participants Less than $2.5 M $2.5 to $7.5 M Greater than $7.5 M 2009 2010 2011 2012 2009 2010 2011 2012 2009 2010 2011 2012 2009 2010 2011 2012Chief Executive OfficerQ1 7% 12% 8% 6% 5% 9% 6% 4% 6% 12% 9% 4% 15% 10% 16% 17%Median 14% 20% 14% 11% 8% 16% 10% 8% 11% 20% 13% 10% 21% 14% 17% 21%Average 15% 21% 16% 18% 11% 19% 13% 15% 11% 18% 16% 18% 24% 20% 21% 23%Q3 20% 23% 20% 24% 17% 24% 18% 10% 16% 23% 26% 21% 30% 22% 26% 26%Please note that incentive survey results do not include organizations reporting “0”
  9. 9. 9 NAM Survey Trends Executive Incentive Compensation Awards as Percentage of Base Salary (All Participants and by Budgetary Category) All Participants Less than $2.5 M $2.5 to $7.5 M Greater than $7.5 M 2009 2010 2011 2012 2009 2010 2011 2012 2009 2010 2011 2012 2009 2010 2011 2012ExecutivesQ1 4% 4% 5% 4% 5% 2% 2% 2% 4% 4% 4% 3% 6% 9% 5% 12%Median 7% 8% 7% 10% 6% 3% 4% 4% 5% 7% 6% 6% 12% 11% 8% 13%Average 10% 13% 14% 16% 7% 6% 5% 7% 6% 10% 12% 14% 15% 16% 16% 19%Q3 13% 14% 9% 14% 10% 6% 8% 9% 7% 11% 8% 10% 19% 15% 18% 17%Please note that incentive survey results do not include organizations reporting “0”
  10. 10. 10NAM Survey Trends – Incentive Compensation Practices Percentage Awarding Incentive Compensation 2009-2011 (All Participants by Budgetary Category) Greater than $7.5 Less than $2.5 Million $2.5 to $7.5 Million Million 2009 2010 2011 2012 2009 2010 2011 2012 2009 2010 2011 2012 Chief Executive Officer 67% 43% 67% 71% 73% 67% 65% 75% 81% 86% 88% 95% All Survey Positions 58% 39% 60% 59% 47% 62% 61% 69% 77% 72% 82% 83%
  11. 11. 11 NAM Survey Trends – CEO Deferred Compensation Percentage Awarding Deferred Compensation 2012 (All Participants and by Budgetary Category) All Participants Less than $2.5 $2.5 to $7.5 Million Greater than $7.5 Million Million n 15 of 69 2 of 28 4 of 20 9 of 21Percentage Providing 22% 7% 20% 43%Median Award $35,000 na* $27,000 $75,680Median Award as Percentage of Salary 15% na* 10% 19%Average Award $72,807 na* $31,365 $102,294Average Award as Percentage of Salary 25% na* 11% 22%*Insufficient data to report
  12. 12. 12Approaches to Market Pricing: Defining the Marketplace Defining the peer group of market comparators is the most crucial step in market pricing as the selection of the peer group has received increasing scrutiny by Board members, the public, and other stakeholders. Factors in developing an accurate and defensible comparator peer group:  Organizations with similar  Mission  Location  Scope  Budget  Staff size  Impact  Similar talent pool for executive attraction/retention  Specific characteristics of the executive  Work history, professional background, other (e.g., political background)  Education and experience requirements  Time in position
  13. 13. 13Using Survey Data Understand the database Ensure sufficient number of data points Identify the most comparable positions in the survey Understand use of base salary versus total cash compensation in selecting survey data
  14. 14. 14Setting Executive Compensation Levels When setting compensation levels for the CEO and other senior positions, consider:  Compensation philosophy  Organization financial status and affordability of executive compensation  Internal pay practices among executives and staff  Board opinion
  15. 15. 15 Broader Marketplace Trends – Base Salary  Projected Salary Increase Comparison (2010-2012): Median Results of Quatt Associates Salary Planning Survey 1 2 2010 Projected Data 2011 Projected Data 2012 Projected DataTotal Salary Increases (Obtained in October 2009) (Obtained in October 2010) (Obtained in October 2011)Chief Executive 2.1% 3.0% 3.0%Executives 2.1% 3.0% 3.0%Staff 2.3% 3.0% 3.0%Percentage of Organizations 36.4% 8.8% 5.9%Holding Salaries Flat1 Data are salary increases measured as a percentage of salary budget, not as a percentage of incumbent salary.2 Results include organizations reporting holding salaries flat.
  16. 16. 16Broader Marketplace Trends – Annual Incentive Continued and growing use of incentive compensation plans. Focus on ensuring:  Goals are defined relative to mission and strategy.  Incentive levels are supported by meeting financial goals  Plan is driving the right types of results and leadership behaviors  Incentive payouts (individually and in total) correspond to the level of performance achieved More organizations are using formal, objective-based, formula-driven plans rather than subjective methodologies to determine awards  The best formula-driven plans have formal plan documents and define:  Formal tie between performance goals and the compensation plan  Measurements for success – both an institutional “scorecard” and a leadership assessment score  A few organizations have developed long-term incentive plans
  17. 17. 17Broader Marketplace Trends – Long Term and RetentionIncentive Plans The prevalence of long-term incentive plans (LTIPs) has been increasing in the last few years. LTIP’s are often structured in 457(f) plans. The main objectives of LTIPs are to reward long-term performance and promote executive retention. Award amounts are usually much lower than in for-profits, where they can generate a significant portion of an executive’s pay package.
  18. 18. 18Broader Marketplace Trends – Governance Increased level and demands of governance related to executive compensation and performance assessment due to:  Increased availability of compensation information through the new 990 reporting requirement  Significantly greater scrutiny of compensation data by the public, stakeholders, the press, government and internal staff  Board Committees, not individual Board Chair, making decisions  Greater engagement of full Board  New 990’s ask if all Board members have received the 990.  Greater practice in documenting compensation philosophy, system, annual performance and decision processes  Documented defensibility
  19. 19. 19Board Compensation Decision Making Factors Factors for determining appropriate executive compensation  Market value of the position  Pay trends in the sector in which board members and stakeholders operate  Compensation trends among peer organizations and in the geographical area  Contract terms and compliance with the established compensation philosophy and compensation system, including the pay for performance system  The performance of the organization, including its financial performance  Staff compensation practice, for example the differential between executive compensation and staff compensation  Perceived fairness on the part of observers, including:  The Board members  The stakeholders  The public
  20. 20. 20Quatt Associates Background Information Quatt Associates is a management consulting firm dedicated to serving the not-for-profit sector. Our practice includes:  Executive compensation systems, including performance-based award plans and deferred compensation plans. We also conduct intermediate sanctions reviews, including analysis of compensation and benefits practices. We have published a book on executive compensation for not-for-profit organizations, Nonprofit Executive Compensation: Planning, Performance, and Pay.  Executive performance systems. We assist organizations in establishing institutional and executive performance objectives and measures, including development of leadership assessment processes and tools. We also develop guidelines and processes for boards of directors to assess and manage executive performance.  Job classification, salary administration, and compensation systems, including career pathing systems, customized reward systems, and performance-based compensation systems. We conduct annual compensation surveys of not-for-profit organizations.  Assisting organizations in establishing staff performance objectives measures and systems. We provide training on performance management and coaching to ensure effective program implementation.  Conducting strategic and business process planning and working with boards on effective board management and development.  Working with both individual executives and leadership teams to improve their effectiveness in managing the organization. We develop succession planning programs to support effective institutional development and management succession.
  21. 21. 21Quatt Associates Contact Information Charles W. Quatt, Ph.D. Jonathan Covington President Consultant Quatt Associates, Inc. Quatt Associates, Inc. 2233 Wisconsin Avenue, NW 2233 Wisconsin Avenue, NW Suite 501 Suite 501 Washington, DC 20007 Washington, DC 20007 (202) 342 1000 x. 103 (202) 386 7624 cquatt@quatt.com jcovington@quatt.com

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