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HUMAN RESOURCES

What to Pay Your Top Team
 

Are you paying your CFO too much, too little, or just the right amount? What about your technology chief? Or your operations expert? Read on and find out.

Peter and Maria Hoey

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You're sitting across the desk from the guy who could be your next chief financial officer. He has the credentials, the experience, and a personality that will fit right in with your team. So how much money should you offer? Go too low, and you risk losing the prospect. Go too high, and you're stuck with buyer's remorse.

For nearly all companies in all industries, salaries are the single largest expense. But forget about finding reliable data to help you make a smart decision. Public companies are required to reveal what they pay their executives, but private firms are under no such obligation, leaving private-company compensation information hard to come by. Until now.

Inc. decided to figure out exactly how much it costs to hire top-quality C-suite talent. To do so, we teamed up with PayScale, a leading provider of salary and compensation data. PayScale, which is based in Seattle, has a database stuffed with salary information from more than 10 million anonymous users. We asked the company's data crunchers to comb that database for median cash compensation--base pay plus bonus, not including stock options, benefits, or other noncash forms of compensation--for senior executives at privately held companies with 10 to 1,000 employees. Then we sliced the data by metropolitan area, industry, and company size. Of course, cash isn't everything, so we have also looked at which executive-style perks are in style these days.

The ratio between pay for CEOs and that of their top managers stays fairly constant regardless of company size. Cash compensation for CFOs and CIOs, for example, runs about 60 percent that of CEOs. For operations officers, the number is closer to 70 percent--though their pay jumps fast as companies increase in size and operations get trickier. Regardless of industry or location, top talent doesn't come cheaply. Towers Perrin, a human resources consulting firm, forecasts a 4.1 percent increase in salaries for executives and senior managers this year--on top of a 4.2 percent jump in 2007.

Moving Expenses

Going Places...

Companies typically pay a new executive's relocation expenses, which can include buying his or her old house if it doesn't sell within 60 to 90 days. Some companies offer to pay the executive's rent on a luxury house near the office--which gives the executive the option of holding on to the old place.

...Or Staying Home

Roughly 70 percent of recruiters say executives are increasingly open to so-called extreme commuting as an alternative to relocation, according to search firm Korn/Ferry International (NYSE:KFY). Family ties are the leading reason, with lifestyle factors and housing market costs also important.

Stock Options

Eyes on the Prize

About a third of private companies offer long-term incentive plans, with most using stock options or bonuses that pay out after a few years, according to human resources association WorldAtWork. To keep execs focused on the long term, some businesses pay an annual bonus and put an additional 50 percent in a long-term fund that's awarded to the executive if he or she stays for three years.

Health Care

No Aches, No Pains

Insurance premiums rose 6.1 percent last year, according to the Kaiser Family Foundation--but don't expect top executives to feel the pain. Unlike rank-and-file employees, who are paying more for their coverage, C-level executives often have their premiums fully paid by the company.

That's Not All

Eighteen percent of companies offer free physicals to executives, according to Compdata Surveys. In many cases, these exams take place at renowned hospitals and cost thousands of dollars. Perks include access to a medical concierge who will arrange things like a hotel room if you're from out of town.

Last updated: Mar 1, 2008




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