Many board members of for-profit corporations receive pay for their work in guiding the company. However, the situation is very different in the nonprofit sector. Although there is no prohibition on paying members of these nonprofit boards, the IRS does require that compensation be reasonable and, to the IRS, that means that the compensation should be the amount that would ordinarily be paid for like services by a like enterprise under like circumstances. This is the same requirement that covers all executive compensation by charitable nonprofits. This whitepaper looks into the incidence and amount of compensation for board members in the nonprofit sector.
When evaluating research, a natural question is whether the results of the research match reality. Can the numbers be trusted? Will they improve the decisions that a manager makes? To answer these questions, a user might examine the sample size or methodology of a survey, which are both reasonable approaches for an individual to evaluate a data source. However, these techniques put the burden of evaluation on the individual user. Another approach is for the research firm to compare the results of one study to the results of a second, independent, study. A high level of agreement between the two studies lends credence to the accuracy of both studies. Simply stated, if we ask a question twice and we get the same results each time, we can have a higher level of confidence in the accuracy of the research methods. There are several ways to compare research methods, the most appropriate of which depends on the type of research being evaluated. In regards to compensation research, one way to examine the quality of research is to compare published results to data that were collected at the time of publication. The current paper performs this by comparing time matched independent datasets from ERI’s Salary Assessor and ERI Salary Surveys.
The ERI Executive Compensation Index is a quarterly report that measures trends in executive compensation using analysis of the companies included in the Russell 3000 index. The Russell 3000 is comprised of 3000 publicly traded U.S. firms that collectively represent roughly 98% of the investable equity market in the United States. The ERI Executive Compensation Index specifically highlights compensation for three executive positions: (1) Chief Executive Officer, (2) Chief Operating Officer, and (3) Chief Financial Officer. This report will also discuss the fluid landscape for the benchmark and analysis of executive compensation packages.
This learning aid serves as a salary planning resource. Salary is one of the financial levers used to attract, retain, and motivate talent. It is also the largest line item in financial statements, represents a fixed cost to the organization, and has a cumulative effect on cash flow. An effective salary plan requires involving the right stakeholders and working through a collaborative process.
Why develop cash incentive plans? Effective human resources programs depend upon achieving business goals (or return on investment). To reach these goals, HR professionals leverage the use of cash incentive plans which generally take the form of pay-for-performance plans.
Why and how would you want to develop job evaluations? With the stiff competition for talent, a key differentiator for employers is offering career growth opportunities. Accordingly, systematic job evaluation becomes an essential part of the employer’s value proposition. Understanding the knowledge, skills, abilities ,and behaviors needed to perform the job responsibilties of a promotional opportunity can be a powerful motivator for an employee and creates a clear line of sight for career growth.
Why and how would you want to conduct a job analysis? With the high velocity of change in organizations, jobs and employee responsibilities are evolving more quickly than before. Understanding the impact of change on job responsibilities as it pertains to talent management and overall human capital strategy is at the heart of job analysis. You are trying to find out the what, the how, and the why of the job.
Job Analysis Part I was a refresher for individuals who are familiar with job analysis. This follow-up paper, Job Analysis Part II, is intended to provide more insight and instruction for those new to job analysis. There are 7 major steps in a job analysis approach to designing a compensation system: 1. Select jobs and tools and methods, 2. Collect data 3. Conduct data audits 4. Create solutions by analysis 5. Integrate market data 6. Calculate averages and 7. Create ranges
By most indications, the economy is showing signs of strengthening at the time of this research. The Gross Domestic Product (GDP) in the United States expanded at an annual rate of 2.0 percent as of the end of the third quarter 2013, with the national unemployment rate hovering at 6.7 percent, and home sales improving, albeit at a sluggish rate. In tandem with this growth, we are seeing some executive pay-for-performance plans result in payouts above target. This paper will examine the magnitude of these payouts relative to the longer term sustainable performance indicator of the three-year Total Shareholder Return (TSR).
The stakeholder demographics of a publicly traded organization directly affect the organization’s culture as well as the compensation practices. In this whitepaper, CEO Compensation and Controlled Companies, we compare CEO pay level similarities and differences focusing on investor demographics, delineating controlled companies that have few majority shareholders and their non-controlled counterparts with diverse constituent shareholders.
In this white paper, Salary Trends Among Medical Professionals: 1998-2013, we study how salaries have changed for healthcare professionals in the past 15 years. To examine the issue, a study was conducted which compared the salary changes of 113 occupations in the medical field, ranging from Medical Technicians to Physicians. All occupations used in this study were consistently tracked on a quarterly basis in ERI’s Salary Assessor®.
In this white paper, Analysis of Salary Growth over Time: 1998 - 2012, we examine how salaries have grown over the past 15 years using the underlying data from ERI’s Salary Assessor. To examine this growth, an historical database of national mean salary figures was compiled. Data were taken from the January 1 release of each Assessor dataset to determine the year-to-year salary growth change. These data were analyzed in three ways: first, by examining annual percentage of salary growth from 1998 to 2012; second, by the average annual salary; and finally, the average annual increase was compared with the annual dollar increase.
Have occupational demands changed over the past 40 years? Given the rise of technology and an increase in population attaining higher levels of education, would you believe the answer is, no? This white paper, Changes in Occupational Demands, examines job analyses conducted by organizations using the Position Analysis Questionnaire (PAQ) tool.
Most companies based in North America typically have operations or a business unit established in the United States and Canada. Publicly traded corporations may have their stocks listed in ex¬changes of several countries which require compliance with public filing disclosures that vary from country to country, in most cases. In the white paper, Comparing Executive Summary Compensation Tables in the US and Canada, we review recent regulations, rules, and definitions in the U.S. and Canada that directly impact executive compensation information reported in the Summary Compensation Tables (SCTs) of required public filing disclosures, highlighting both the similarities and where they may differ.
The Fair Labor Standards Act (FLSA) is designed to ensure that employees are compensated fairly for the amount of work that they provide to an organization. One portion of the act covers whether an employer is required to pay an employee for the amount of overtime worked. Organizations work to comply with the requirements of the Act, but there are several common mistakes that regularly occur when determining a position’s exemption status. This white paper, Common FLSA Exemption Test Pitfalls, deals with three of the most commonly used exemptions and the pitfalls that organizations will frequently fall into using these exemptions.
The report on activities and plans for the Exempt Organizations (EO) division of the Tax Exempt and Government Entities of the IRS provides some insight into what’s ahead for nonprofits – good to know if your nonprofit is in a group targeted for some scrutiny. This white paper, IRS and Nonprofits: What Happened in 2011 and What to Expect in 2012, highlights accomplishments in Fiscal Year (FY) 2011 and previews plans for FY 2012, as outlined by EO Director Lois Lerner.
Having gained popularity in the early 1990s, skill-based pay plans continue to play important roles as standalone or supplemental compensation systems. General information on the benefits and challenges of instituting skill-based pay, as well as insights on developing a plan, are just some of the topics covered in ERI’s free white paper, Introduction to Skill-Based Pay.
In addition to unprecedented and persistently high unemployment rates since 2008, employers have been cautious with staffing by hiring more part-time workers. Combined, these factors have given organizations the advantage of attracting top talent in the underutilized and involuntary part-time labor markets. This white paper, Underemployment: Implications for Organizations, provides an analysis of industry sectors and related job losses to examine the composition of the underemployed and details proactive approaches employers might use to sustain the benefits of these market advantages.
Numbers on the paycheck aside, how an employee perceives his or her compensation as fair affects your organization. This white paper, Perceived Fairness in Compensation, outlines potential problems associated with perceptions of fairness within the context of compensation, examines how individuals discern fairness, and provides practical ways to help employees understand how their salaries are set.
Are executives at nonprofits paid reasonably? Debates over compensation in the nonprofit sector are heated and ongoing, often without reference to compensation data that are reported annually to the IRS on Forms 990 filed by most organizations. In the white paper, Improved Transparency for Charity Executive Pay: A Review of Form 990 Data, ERI addresses the questions that are relevant for the ongoing discussion of unreasonable compensation in the charitable sector.
Referencing past trends and current practices regarding compensation and benefits as touchstones, this report looks ahead, examining the need for new constructs to combat issues concerning wage theft, executive compensation, student debt, and health care costs, among others. Economics 2040: U.S. Compensation and Benefits Constructs is focused on the data — the numbers behind the constructs — and what those numbers indicate for the coming years.
Job analysis continues to play an important role in the successful management of organizations. This report provides reasons for conducting job analysis on a regular basis, examines what information to collect, and highlights the differences in varying methodologies. Practical advice on conducting job analysis interviews and writing job descriptions is also included.
Realizing that people respond to rewards isn’t a difficult notion to grasp. Determining how much to reward, to whom, and when, however, are complex decisions organizations contend with to motivate employees and retain high performing individuals in a competitive market. This white paper, Principles of Merit Pay, draws on history, theory, and common practice to outline the basics of a successful merit-based system.
While compensation researchers genuinely work to provide accurate information, there remain inherent strengths and weaknesses to different methods of collecting, interpreting, and reporting data. Compensation professionals who understand these strengths and weaknesses are better equipped to analyze the results for use in determining pay, setting salary structures, and evaluating established compensation systems. For the purposes of this white paper, we will highlight the pros and cons of three methodologies, all of which utilize employer-provided data: surveys from national statistics offices, traditional salary surveys, and salary survey analytics.
Sources of salary surveys vary considerably as to their usefulness and quality. While the manner in which surveys are conducted and published has become more and more efficient, ease-of-use and quick turnaround does not necessarily guarantee accurate data. Now, more than ever, identifying, evaluating, and selecting the appropriate compensation data source is just as important as how the information is analyzed and applied.
Where do you get your executive compensation data? In addition to compensation surveys conducted by ERI Salary Surveys, one method we employ is to capture financial information disclosed by publicly traded organizations, both annually and quarterly. This paper examines the background of the governing authorities directing these disclosures, the actual requirements imposed on publicly traded organizations, and where the data is made available to the public.
The Health Care industry continues to transform amidst regulatory changes and in response to patients' demands. Publicly Traded U.S. Hospital Systems and 2010 Annual Incentive Performance Plans covers the CEO annual cash compensation for the top five publicly traded hospital systems and reviews the corresponding incentive plan performance measures.
Workforce mobility has moved from a transaction to strate¬gic role in the overall development and management of talent. Making mobility attractive to key talent depends on justifiable COL analyses and reports. There are hundreds of data elements, numerous formulas and various statistical estimating techniques that are combined to estimate COL differentials. Each part of the modeling process should be based on sound economic theory and use widely-accepted estimating techniques, as covered in Cost-of-Living Data and Models: Credible? Defensible? Robust?
With the recent regulations regarding executive pay and required disclosures, some companies are still struggling to provide a sufficient level of transparency in CD&A (Compensation Discussion & Analysis) sections, to align executive compensation with shareholder interests, and to garner an approval for the non-binding advisory vote on executive compensation. In addition to being an exercise in legal compliance, writing the CD’s section of a proxy statement should be viewed as a service to shareholders, providing them with useful, concise, and practical information on which to base investment decisions. We formulated a “scorecard” for evaluating the CD&A section in order to provide a checklist that can aid the reader in improving disclosures and incorporating best practices.
The process of examining compensation data involves many statistical considerations, which can be overwhelming at times, especially when unique or interesting situations arise. By understanding the idiosyncratic nature of compensation data, professionals making salary and wage decisions can develop a clearer picture of how this variable works, improving the quality of their compensation planning. For the purposes of this white paper, five technical aspects of compensation data are explored: the curvilinear nature of data, outliers, wage fluctuation, accurately aging data, and heteroscedasticity.
With various accounting standards and ongoing regulatory changes, several terms have become prevalent for explaining the value of the equity component within executive compensation. The most common terms are fair market value, fair value, and intrinsic value. More recently, the terms realized pay and realizable pay have been introduced to explain the actual or highly probable compensation income that an executive derives from equity components as part of his or her total compensation over a specific performance measurement period. In this white paper, we establish a framework for these equity valuation terms within appropriate contexts relative to publicly-traded corporations’ executive compensation plans, where valuations are more readily ascertainable.
In this white paper, Tracking Salary Trends by Education Level and Degree, we focus on salary change by education over the past 15 years. Similar to our previous white paper, Analysis of Salary Growth Over Time, this study uses underlying data from ERI’s Salary Assessor and is broken down into two separate analyses: overall growth by education level and growth by degree. This analysis was conducted using 360 occupations that were examined on a quarterly basis between 1998 and 2012. These analyses are not intended as a recommendation or endorsement for a field of study or specific academic degree. Rather, they are meant to further the discussion of salary trends and compensation research.
Executive compensation and company revenue are up in 2013. In fact, this is the first time since late 2007 that both Named Executive Officer compensation and company revenue showed year-over-year gains greater than 10 percent (ERI, 2013). With economic recovery in sight, what trends have occurred relative to the performance of U.S. corporations and executive compensation pay practices? Are organizations rewarding their executives differently, or has compensation simply risen across the board? In this white paper, CEO Equity Compensation Calibration, we examine the mix of equity compensation, specifically stock and option awards, and how each has changed over the period of 2007 through 2011.
The latest report on the activities and plans for the Exempt Organizations (EO) division of the Tax Exempt and Government Entities section of the IRS makes it clear that what’s reported on the Form 990 matters: “The IRS uses the Form 990 responses to select returns for examination, so a complete and accurate return is in your best interest.” EO Director Lois Lerner outlines accomplishments in Fiscal Year (FY) 2012 and provides a work plan for FY 2013 in the 24-page report. A complete summary is available in this white paper, 2012 Annual Nonprofit Report.
Traditional salary surveys, such as those published by ERI Salary Surveys, are unique in that they provide a snapshot of compensation data in time. These types of surveys have been relied upon as long as compensation professionals have been using salary data to set market wages. Because salary surveys are collected during a specific window of time, and the resulting report reflects that period (typically, one year), the data can be used to examine year-to-year trends in pay. This white paper, Salary Survey Trends in Pay: 2011 – 2012, focuses on salary fluctuations from 2011 to 2012 using data from ERI Salary Survey. It highlights general market shifts and identifies possible reasons behind the findings.