THE BDO 600 2017 SURVEY OF AND COMPENSATION PRACTICES OF 600 MID-MARKET PUBLIC COMPANIES
CONTENTS INTRODUCTION... 1 HOW TO USE THIS SURVEY... 2 / COMPENSATION PRACTICES Overall Results... 4 By Company Size... 5 By Industry... 10 ABOUT BDO... 20 CONTACT US... BACK COVER
THE BDO 600: 2017 Survey of and Compensation Practices of 600 Mid-Market Public Companies Introduction BDO s Compensation and Benefits practice offers an experienced and dedicated team of professionals who operate nationwide to seamlessly provide a comprehensive array of services to address client needs. ABOUT BDO S COMPENSATION AND BENEFITS PRACTICE BDO s Compensation and Benefits practice offers an experienced and dedicated team of professionals located throughout the U.S. who seamlessly provide a comprehensive array of services to address board compensation and executive compensation issues, including executive and board compensation arrangements, cash and equity incentives, developing executive and board compensation strategies benchmarking, executive compensation tax and accounting issues, executive nonqualified plan arrangements, compensation committee development, and other related services. We serve a broad base of clients, from mid-size domestic companies to Fortune 500 multinational corporations. ABOUT THE BDO 600 SURVEY The BDO 600 survey details the compensation practices for Chief Executive Officers () and Chief Financial Officers () of publicly traded companies in the following industries: XXEnergy XXFinancial Services Banking XXFinancial Services Nonbanking XXHealthcare XXManufacturing XXReal estate XXRetail XXTechnology Companies in the six non-financial service industries have annual revenues between $100 million and $3 billion. Companies in the two financial services industries have assets between $100 million and $6 billion. All data in our survey were extracted from proxy statements that were filed between April 2016 and March 2017. Consolidated proxy information was provided by.com. Our survey is unique because it focuses on middle-market companies; most compensation surveys focus on much larger companies. -1.1% In fiscal year 2016, Total Direct Compensation decreased by an average of 1.1% 1.5% In fiscal year 2016, Total Direct Compensation increased by an average of 1.5% 1
THE BDO 600: 2017 Survey of and Compensation Practices of 600 Mid-Market Public Companies How To Use This Survey The data collected from the 600 companies surveyed represent the policy in effect at each company as of their fiscal year-end, as disclosed in the executive compensation narrative in public filings. The data was analyzed in aggregate by the standard five components of compensation: salary, bonus and annual incentives (AI), stock options, other long-term incentives (LTI), and full-value stock awards. TYPES OF COMPENSATION X X is the annualized salary received by the incumbent. X X comprises discretionary bonuses earned as well as payments received under annual incentive plans. X X values are the grant date fair value awards as reported by each company. If a company did not report these values, the values were calculated using the FAS123R assumptions as reported by the company. Irregular grants have been annualized. X X Full-value data include both stock and stock unit awards. The grant date fair value of the awards was used in this analysis. Irregular grants have been annualized. X X refers to payments received under long-term incentive plans. X X Total Direct Compensation () represents the sum of salary, bonus and annual incentives, stock options, fullvalue stock awards, and other LTI for each incumbent. 2
THE BDO 600: 2017 Survey of and Compensation Practices of 600 Mid-Market Public Companies DATA ARRANGEMENT The survey data are organized by company size and industry. Compensation can be benchmarked by either of these groups to gain different perspectives on compensation practices. The groups are described in more detail below. COMPANY SIZE Most traditional executive compensation benchmarking uses annual revenues (or assets within financial services) as the primary scope factor due to the well-established, direct correlation between company size and executive compensation. Our survey reports compensation for three groups of companies based on size: Size Revenue Range Category Group A $100 million $500 million Group B $500 million $1.25 billion Group C $1.25 billion $3 billion Asset Range (Financial Services) $100 million $1.25 billion $1.25 billion $2.5 billion $2.5 billion $6 billion INDUSTRY Industry is another common lens used when benchmarking director compensation. This survey reports compensation provided to executives of companies within the following industries: XXEnergy XXFinancial Services Banking XXFinancial Services Nonbanking XXHealthcare XXManufacturing XXReal Estate XXRetail XXTechnology ADDITIONAL NOTES ON THE SURVEY In cases where there was more than one or in a given fiscal year, compensation for the incumbent who served in the position for the majority of the year was used. In order to establish a common comparative base for all 600 companies surveyed, if necessary, data were annualized and a consistent methodology was used to value compensation. If a surveyed company could not be brought into parity with other participant companies, it was excluded from the survey and replaced with a company chosen at random to obtain a representative sample across industries and company size. 3
THE BDO 600: 2017 Survey of and Compensation Practices of 600 Mid-Market Public Companies OVERALL RESULTS - TOTAL DIRECT COMPENSATION $4,000,000 $3,500,000-1.1% $3,000,000 $2,500,000 $2,000,000 $1,500,000 $1,000,000 $500,000 $0 1.5% FY 2016 FY 2015 FY 2016 FY 2015 Overall Results The tables below summarize average 2016 pay for the and compared to 2015. The percent increase or decrease for each pay component is provided. Total Direct Compensation () for the position decreased slightly (by 1.1 percent) whereas for the position saw a 1.5 percent increase compared to the prior year. Though there was a small overall change in and salary movement, there are significant differences by industry. 2016 Compensation 4 2016 $683,072 $790,564 $340,262 $1,923,947 $32,493 $3,770,338 2015 $665,952 $747,013 $314,675 $2,060,984 $24,729 $3,812,353 Change over Prior 2.6% 5.8% 8.1% -6.6% 31.4% -1.1% 2016 $395,509 $298,016 $97,660 $670,101 $7,334 $1,468,620 2015 $382,107 $263,904 $112,474 $677,342 $10,552 $1,446,379 Change over Prior 3.5% 12.9% -13.2% -1.1% -30.5% 1.5% Compensation Mix The 2016 average compensation mix for s is weighted more heavily toward long-term incentives /equity whereas the compensation mix for s is more evenly split between cash and long-term incentives/equity. Annual Cash LTI Total Annual Cash LTI Total 2016 39% 61% 100% 2016 47% 53% 100% 2015 37% 63% 100% 2015 45% 55% 100% The compensation mix has been fairly consistent from FY 2013 through FY 2016. The majority of equity value provided to both s and s is delivered through full-value stock awards. The remainder of this survey further dissects the collective data and presents results by company size and industry.
THE BDO 600: 2017 Survey of and Compensation Practices of 600 Mid-Market Public Companies OVERALL RESULTS BY COMPANY SIZE $6,000,000 $5,000,000 $4,000,000 $3,000,000 $2,000,000 $1,000,000 $0 Group A Group B Group C Group A Group B Group C SURVEY BY COMPANY SIZE Overall Results Key findings of our analysis of pay based on company size are summarized here. 1. Pay continues to be highly correlated with company size: As shown in the chart above, and compensation is generally correlated with company size. This result is expected because of the long-established historical link between company size and compensation among executives. total direct compensation ranges from $2,503,708 for companies in Group A, the smallest size category 1 to $4,966,755 for companies in Group C, the largest size category 2. total direct compensation ranges from $992,155 for companies in Group A to $1,911,280 for companies in the Group C. 2. Pay for the increased only at the smaller companies. For the, increases were seen at the small and midsized companies. The chart below shows year-overyear changes for the and across each size category. over Change in 10% 8% 6% 4% 2% 0% -2% 8% -3% 3% 7% -4% -4% -4% -6% Group A Group B Group C 1 $100 million $500 million revenues and $100 million - $1.25 billion in assets (financial services) 2 $1.25 billion $3 billion revenues and $2.5 billion - $6 billion in assets (financial services) 5
THE BDO 600: 2017 Survey of and Compensation Practices of 600 Mid-Market Public Companies 3. s are paid approximately 40 percent of the of s in our sample. as % of 39.6% 4. Full-value shares dominate long-term incentives: Our findings reveal that full-value stock is favored over stock options for companies of all sizes, for both positions. Mix of vs. Full Value Shares 38.7% 38.5% 39.0% Full-value 85% Full-value 87% Group A Group B Group C All / 15% / 13% 5. Larger companies place a greater percentage of pay at risk: The table below illustrates how variable compensation increases along with the size of the company. Pay Mix by Company Size 55% 62% 63% 46% 55% 54% 21% 23% 20% 21% 19% 22% 22% 18% 16% 33% 26% 25% Group A Group B Group C Group A Group B Group C + LTI The following pages detail our findings for each of the three company size categories. 6
THE BDO 600: 2017 Survey of and Compensation Practices of 600 Mid-Market Public Companies SIZE GROUP A SIZE GROUP A $25,115 $562,532 $1,692 $326,337 $1,125,907 $570,097 $403,376 $205,799 $220,057 $54,951 SURVEY BY COMPANY SIZE Size Group A* The average compensation paid to s and s of companies in the smallest size group for FY 2016 and 2015 is provided in the table below. Compensation 2016 $562,532 $570,097 $220,057 $1,125,907 $25,115 $2,503,708 2015 $554,565 $497,967 $206,591 $1,052,775 $12,332 $2,324,230 2016 $326,337 $205,799 $54,951 $403,376 $1,692 $992,155 2015 $325,845 $189,454 $68,376 $368,581 $12,567 $964,824 The resulting compensation mix is shown below: Annual Cash LTI Total Annual Cash LTI Total 2016 45% 55% 100% 2016 54% 46% 100% 2015 45% 55% 100% 2015 53% 47% 100% * $100 million $500 million revenues and $100 million - $1.25 billion in assets (financial services). 7
THE BDO 600: 2017 Survey of and Compensation Practices of 600 Mid-Market Public Companies SIZE GROUP B SIZE GROUP B $40,398 $697,497 $9,335 $396,057 $2,104,642 $775,547 $742,216 $282,209 $309,309 $90,383 SURVEY BY COMPANY SIZE Size Group B The average compensation paid to s and s of companies in the middle size group for FY 2016 and 2015 is provided in the table below. The total direct compensation decreased due to a decrease in full-value stock awards. Compensation 2016 $697,497 $775,547 $309,309 $2,104,642 $40,398 $3,927,393 2015 $677,533 $671,934 $338,622 $2,313,308 $34,456 $4,035,853 2016 $396,057 $282,209 $90,383 $742,216 $9,335 $1,520,200 2015 $383,428 $228,473 $99,313 $703,580 $10,708 $1,425,502 The resulting compensation mix is shown below: Annual Cash LTI Total Annual Cash LTI Total 2016 38% 62% 100% 2016 45% 55% 100% 2015 33% 67% 100% 2015 43% 57% 100% 8
THE BDO 600: 2017 Survey of and Compensation Practices of 600 Mid-Market Public Companies SIZE GROUP C SIZE GROUP C $30,764 $797,580 $10,849 $468,397 $2,576,046 $1,051,506 $864,162 $415,743 $510,859 $152,129 SURVEY BY COMPANY SIZE Size Group C The average compensation paid to s and s of companies in the largest size group for FY 2016 and 2015 is provided in the table below. Compensation 2016 $797,580 $1,051,506 $510,859 $2,576,046 $30,764 $4,966,755 2015 $771,834 $1,113,658 $405,222 $2,870,503 $26,649 $5,187,866 2016 $468,397 $415,743 $152,129 $864,162 $10,849 $1,911,280 2015 $441,409 $389,573 $176,977 $978,679 $8,169 $1,994,808 The resulting compensation mix is shown below: Annual Cash LTI Total Annual Cash LTI Total 2016 37% 63% 100% 2016 46% 54% 100% 2015 36% 64% 100% 2015 41% 59% 100% 9
THE BDO 600: 2017 Survey of and Compensation Practices of 600 Mid-Market Public Companies OVERALL RESULTS BY INDUSTRY $6,000,000 $5,000,000 $4,000,000 $3,000,000 $2,000,000 $1,000,000 $0 Energy Fin. Serv. Banking Fin. Serv. Non-Banking Healthcare Mfg Real Estate Retail Tech. SURVEY BY INDUSTRY Overall Results As shown in the chart above, and compensation varies considerably by industry. For middle market companies, industry is just as important as company size when benchmarking and compensation. Among s, manufacturing led the way with a 13 percent increase in average total direct compensation, and financial services-banking was second with a 10 percent increase. Technology and healthcare experienced 11 percent and 9 percent declines, respectively, in average compensation as compared to FY 2015. Similarly, manufacturing s led the way with a 12 percent increase in average total direct compensation, which is partly attributable to companies paying large bonuses coupled with significantly larger stock grants. compensation ranges from $1,985,614 for companies in the technology industry to $378,486 for companies in the financial services-banking industry. Our findings reveal that companies in the financial servicesbanking industry favor cash over equity for s as well, with a compensation mix of 83 percent cash and 17 percent equity/ LTI. Other industries feature a more balanced compensation mix between annual cash and equity/lti. Full-value stock awards are favored over stock options for companies in all industries. compensation ranges from $5,093,727 for companies in the technology industry to $824,023 for companies in the financial services-banking industry. Our findings reveal that companies in the financial services-banking industry favor cash over equity, with a compensation mix of 75 percent cash and 25 percent equity/lti. Other industries feature a more balanced compensation mix between annual cash and equity/lti. 10
THE BDO 600: 2017 Survey of and Compensation Practices of 600 Mid-Market Public Companies PAY MIX BY INDUSTRY 63% 63% 25% 23% 17% 20% 51% 41% 68% 54% 47% 55% 60% 53% 53% 43% 76% 66% 21% 16% 17% 20% 52% 63% 30% 31% 16% 16% 25% 25% 24% 29% 30% 28% 18% 16% 20% 16% 25% 22% 21% 26% 17% 40% 11% 13% 14% 20% Energy Fin. Serv. Banking Fin. Serv. Non-Banking Healthcare Mfg Real Estate Retail Tech. + LTI The relationship of to pay varies somewhat by industry. s make the least relative to the in the healthcare and retail industries (35 percent) and make a bit more, in relative terms, in the financial services banking and energy industries (46 percent). AS % OF 46% 46% 36% 35% 38% 41% 35% 39% Energy Fin. Serv. Banking Fin. Serv. Non-Banking Healthcare Mfg Real Estate Retail Technology The following pages detail our findings for each of the eight industries. 11
THE BDO 600: 2017 Survey of and Compensation Practices of 600 Mid-Market Public Companies $34,356 $701,515 $22,866 $394,335 $875,551 $322,131 $2,472,990 $1,129,569 $186,644 $75,161 SURVEY BY INDUSTRY Energy The average compensation paid to energy industry s and s for FY 2016 is shown below along with 2015 pay levels for comparison. Compensation 2016 $701,515 $875,551 $186,644 $2,472,990 $34,356 $4,271,056 2015 $697,957 $614,847 $122,456 $2,736,037 $26,283 $4,197,580 2016 $394,335 $322,131 $75,161 $1,129,569 $22,866 $1,944,062 2015 $392,682 $256,870 $48,498 $1,079,354 $29,513 $1,806,917 The resulting 2016 compensation mix is shown below: Annual Cash LTI Total Annual Cash LTI Total 2016 37% 63% 100% 2016 37% 63% 100% 2015 31% 69% 100% 2015 36% 64% 100% Historically, average compensation in the energy industry was the highest of the industries included in this survey. It has since fallen behind healthcare, real estate and technology. 12
THE BDO 600: 2017 Survey of and Compensation Practices of 600 Mid-Market Public Companies $13,471 $1,476 $167,820 $430,201 $56,001 $239,833 $24,934 $187,597 $7,229 $73,947 SURVEY BY INDUSTRY Financial Services Banking The average compensation paid to s and s of companies in the financial services-banking industry for FY 2016 is shown below along with 2015 compensation. Compensation 2016 $430,201 $187,597 $24,934 $167,820 $13,471 $824,023 2015 $414,103 $164,522 $13,598 $146,161 $12,790 $751,174 2016 $239,833 $73,947 $7,229 $56,001 $1,476 $378,486 2015 $241,950 $67,844 $8,759 $69,140 $957 $388,651 The resulting compensation mix is shown below: Annual Cash LTI Total Annual Cash LTI Total 2016 75% 25% 100% 2016 83% 17% 100% 2015 77% 23% 100% 2015 80% 20% 100% Our analysis found that financial services banking companies provide the highest percentage of compensation in annual cash; however, average and compensation in the financial services banking industry is the lowest of the industries included in our survey. 13
THE BDO 600: 2017 Survey of and Compensation Practices of 600 Mid-Market Public Companies $56,314 $690,952 $2,603 $409,997 $1,563,445 $1,223,223 $498,245 $434,678 $395,339 $85,095 SURVEY BY INDUSTRY Financial Services Nonbanking The average total compensation paid to s and s of companies in the financial services-nonbanking industry for FY 2016 is shown below along with 2015 compensation. Compensation 2016 $690,952 $1,223,223 $395,339 $1,563,445 $56,314 $3,929,273 2015 $698,845 $1,305,189 $251,620 $1,319,097 $57,835 $3,632,586 2016 $409,997 $434,678 $85,095 $498,245 $2,603 $1,430,618 2015 $402,145 $380,845 $54,119 $438,559 $15,906 $1,291,575 The resulting compensation mix is shown below: Annual Cash LTI Total Annual Cash LTI Total 2016 49% 51% 100% 2016 59% 41% 100% 2015 55% 45% 100% 2015 61% 39% 100% This year is the first instance in which the is paid more in LTI than cash. Although the is still paid more in cash than LTI, the compensation mix has been moving towards LTI. 14
THE BDO 600: 2017 Survey of and Compensation Practices of 600 Mid-Market Public Companies $36,446 $732,461 $727,584 $7,905 $474,365 $2,299,821 $793,345 $619,375 $258,692 $225,003 SURVEY BY INDUSTRY Healthcare The average compensation paid to healthcare industry s and s for FY 2016 is shown below along with compensation levels in 2015. Compensation 2016 $732,461 $727,584 $793,345 $2,299,821 $36,446 $4,589,657 2015 $729,247 $897,666 $931,756 $2,510,058 $0 $5,068,727 2016 $474,365 $258,692 $225,003 $619,375 $7,905 $1,585,340 2015 $418,079 $298,867 $260,827 $689,851 $0 $1,667,624 The resulting compensation mix is shown below: Annual Cash LTI Total Annual Cash LTI Total 2016 32% 68% 100% 2016 46% 54% 100% 2015 32% 68% 100% 2015 43% 57% 100% Although the for s has decreased and there have been shifts in all categories, the pay mix stayed the same. The s had significant shifts in stock options, stock awards and other LTI, resulting in an increase in cash compensation compared to the prior year. 15
THE BDO 600: 2017 Survey of and Compensation Practices of 600 Mid-Market Public Companies $73,859 $720,309 $13,128 $391,180 $1,427,493 $897,999 $510,158 $345,989 $501,099 $119,923 SURVEY BY INDUSTRY Manufacturing The average compensation paid to manufacturing s and s for FY 2016 service is shown below along with the year over year change from 2015. Compensation 2016 $720,309 $897,999 $501,099 $1,427,493 $73,859 $3,620,759 2015 $713,638 $769,129 $365,756 $1,300,231 $65,996 $3,214,750 2016 $391,180 $345,989 $119,923 $510,158 $13,128 $1,380,378 2015 $388,317 $265,077 $111,829 $443,606 $28,410 $1,237,240 The resulting compensation mix is shown below: Annual Cash LTI Total Annual Cash LTI Total 2016 45% 55% 100% 2016 53% 47% 100% 2015 46% 54% 100% 2015 53% 47% 100% 16
THE BDO 600: 2017 Survey of and Compensation Practices of 600 Mid-Market Public Companies $0 $736,847 $0 $432,000 $2,762,966 $1,158,617 $1,009,236 $489,741 $137,277 $46,369 SURVEY BY INDUSTRY Real Estate The average compensation paid to s and s of companies in the real estate industry for FY 2016 is shown below along with compensation levels in 2015. Compensation 2016 $736,847 $1,158,617 $137,277 $2,762,966 $0 $4,795,707 2015 $730,989 $1,121,964 $122,515 $3,076,628 $0 $5,052,096 2016 $432,000 $489,741 $46,369 $1,009,236 $0 $1,977,346 2015 $424,176 $450,292 $41,765 $994,425 $0 $1,910,658 The resulting compensation mix is shown below: Annual Cash LTI Total Annual Cash LTI Total 2016 40% 60% 100% 2016 47% 53% 100% 2015 37% 63% 100% 2015 46% 54% 100% 17
THE BDO 600: 2017 Survey of and Compensation Practices of 600 Mid-Market Public Companies $36,753 $795,354 $9,592 $432,698 $1,218,374 $644,423 $354,993 $176,475 $348,198 $98,922 SURVEY BY INDUSTRY Retail The average paid to retail industry s and s for FY 2016 is shown below along with 2015 pay levels. Compensation 2016 $795,354 $644,423 $348,198 $1,218,374 $36,753 $3,043,102 2015 $749,375 $640,124 $322,042 $1,234,489 $22,283 $2,968,313 2016 $432,698 $176,475 $98,922 $354,993 $9,592 $1,072,680 2015 $412,746 $188,747 $164,746 $482,408 $7,165 $1,255,812 The resulting compensation mix is shown below: Annual Cash LTI Total Annual Cash LTI Total 2016 47% 53% 100% 2016 57% 43% 100% 2015 47% 53% 100% 2015 48% 52% 100% While the pay mix has not changed for a few years, compensation has become cash-focused due to significant decreases in all forms of LTI. 18
THE BDO 600: 2017 Survey of and Compensation Practices of 600 Mid-Market Public Companies $6,644 $650,859 $574,708 $327,262 $851 $387,203 $281,011 $3,534,254 $1,190,634 $125,915 SURVEY BY INDUSTRY Technology The average compensation paid to technology industry s and s for FY 2016 is shown below along with the year over year change from 2015. Compensation 2016 $650,859 $574,708 $327,262 $3,534,254 $6,644 $5,093,727 2015 $585,873 $464,337 $383,460 $4,250,207 $7,775 $5,691,652 2016 $387,203 $281,011 $125,915 $1,190,634 $851 $1,985,614 2015 $373,121 $196,297 $209,102 $1,228,352 $0 $2,006,873 The resulting compensation mix is shown below: Annual Cash LTI Total Annual Cash LTI Total 2016 24% 76% 100% 2016 34% 66% 100% 2015 18% 82% 100% 2015 28% 72% 100% Our analysis found that technology companies provide the highest percentage of compensation via equity/lti as compared to companies in the other industries. In addition, s in this industry have been the most highly compensated for two consecutive years, according to this study. 19
THE BDO 600: 2017 Survey of and Compensation Practices of 600 Mid-Market Public Companies The BDO 600: 2017 Survey of and Compensation Practices of 600 Mid- Market Public Companies examined the compensation practices of publicly-traded companies in the energy, financial services banking, financial services nonbanking, healthcare, manufacturing, real estate, retail, and technology industries. Companies in the six non-financial service industries in our survey have annual revenues between $100 million and $3 billion. Companies in the two financial services industries in our survey have assets between $100 million and $6 billion. Data sources include data provided by.com and public company data collected from proxies and other sources. ABOUT BDO BDO is the brand name for BDO USA, LLP, a U.S. professional services firm providing assurance, tax, and advisory services to a wide range of publicly traded and privately held companies. For more than 100 years, BDO has provided quality service through the active involvement of experienced and committed professionals. The firm serves clients through more than 60 offices and over 550 independent alliance firm locations nationwide. As an independent Member Firm of BDO International Limited, BDO serves multinational clients through a global network of 67,700 people working out of 1,400 offices across 158 countries. BDO USA, LLP, a Delaware limited liability partnership, is the U.S. member of BDO International Limited, a UK company limited by guarantee, and forms part of the international BDO network of independent member firms. BDO is the brand name for the BDO network and for each of the BDO Member Firms. For more information please visit: www.bdo.com. Material discussed is meant to provide general information and should not be acted on without professional advice tailored to your firm s individual needs. 2017 BDO USA, LLP. All rights reserved. 20
THE BDO 600: 2017 Survey of Board Compensation Practices of 600 Mid-Market Public Companies 21
THE BDO 600: 2017 Survey of and Compensation Practices of 600 Mid-Market Public Companies Contact Us If you have any questions, comments or suggestions, please contact our Compensation and Benefits practice by emailing us at compensation@bdo.com or by calling your local BDO office. Please visit www.bdo.com/bdo600ceocfo for the electronic copy of this survey. THE BDO 600 SURVEY TEAM CONTACTS: ANDY GIBSON 404-979-7106 agibson@bdo.com TOM ZIEMBA 312-233-1888 tziemba@bdo.com FIRST NAME LAST NAME EMAIL PHONE SUBJECT MESSAGE SUBMIT 22