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BDO 600
Board Director Compensation Trends in Middle-Market Manufacturing Companies BDO Manufacturing & Distribution Practice BDO has been a valued business advisor to manufacturing and distribution companies for more than 100 years. We work with a variety companies from all industrial sectors, ranging from global distributors to start-up and niche manufacturing corporations, on a myriad of accounting, consulting, tax and other financial issues. For more information on BDO USA’s compensation and benefits service offerings for the manufacturing and distribution industry, please contact one of the service leaders below:
Director compensation continues to climb across 600 middle-market companies in eight different industries, according to an analysis conducted by BDO USA, LLP, a leading accounting and consulting organization.
T
he BDO 600: 2012 Survey of Board Compensation Practices of 600 Mid-Market Public Companies examines director compensation trends in publicly traded companies with annual revenues from $25 million to $1 billion in the energy, healthcare, manufacturing, real estate, retail and technology industries; and publicly traded companies with assets between $50 million to $2 billion in the banking and financial services industries. Information for the study was drawn from proxy statements that were filed between May 15, 2011 and July 15, 2012. Continuing a trend from last year, board of directors’ pay increased in the manufacturing
sector, with average total compensation growing from $107,383 last year to $111,926 this year. Even with this 4.2 percent increase, board compensation in this sector still lags behind other surveyed industries, ranking fifth of eight industries studied in overall compensation. Board members in the technology industry received the highest average compensation at $177,249, up from $149,428, an 18.6 percent increase from the previous year. Despite trailing the other industry segments in total compensation, financial services banking and non-banking companies also saw significant upward movement with 13 percent and 10.5 percent increases, respectively, in compensation from last year.
Read more
Contact: Steve Zoellick, Senior Director Compensation and Benefits 404-979-7138 / [email protected] Howard Sosoff, Manufacturing & Distribution Practice Leader 414-287-1115 / [email protected] Matt Becker, Tax Partner 616-802-3413 / [email protected] Brian Eccleston, Assurance Partner 212-885-8220 / [email protected] John Fenton, Assurance Partner 404-979-7118 / [email protected] Stephen Ferrara, Assurance Partner 312-616-4683 / [email protected] Issy Kotton, Assurance Partner 310-557-8266 / [email protected] Fred Rozelle, Assurance Partner 248-244-6544 / [email protected] Rick Schreiber, Assurance Partner 615-493-5641 / [email protected] John Tucci, Assurance Partner 732-750-0900 / [email protected]
2
BDO 600 Board Director Compensation Trends in Middle-Market Manufacturing Companies
Board Director Compensation Trends by Industry – FY 2011 $200,000 180,000 160,000
$151,254
$148,272
$177,249
$125,498
140,000 120,000 100,000
$111,926
80,000
$110,844
$85,132
60,000
$57,426
40,000 20,000 0
Energy
Financial Services Financial Services – Banking – Non Banking
“Director compensation levels in the middle market continue to be differentiated by both industry and company size,” says Randy Ramirez, senior director with the Compensation and Benefits practice at BDO. “Higher compensation levels reflect the industries that are putting a premium on experienced and currently employed executives to serve as board members.”
u Manufacturing Compensation Levels Reflect Slow Economic Recovery Average total director compensation in manufacturing companies ($111,926) is just over half of that of the highest paying industries. The economic downturn affected the manufacturing industry at several points along the supply chain and recovery has been slow; and as a result, boards have been reluctant to increase director compensation.
Healthcare
economic conditions and shareholder returns will likely need to improve.
u Pay Mix Is An Even Split Director compensation is divided almost equally between cash elements, including board and committee retainers and meeting fees (47 percent) and stock compensation (53 percent). Directors at manufacturing companies saw a 17 percent increase in fullshare stock awards and a 17 percent decrease in stock option awards from the previous year. This trend is a reflection of the increased emphasis on directors’ fiduciary, risk oversight and governance roles, and the decreasing emphasis on directors’ role in driving company performance and growth.
Pay Mix: An Even Split
13%
u Industry Profitability
Challenges Compensation
The experience and qualifications needed to serve as a board member, as well as time requirements and legal and reputational risk all continue to increase, and yet director compensation levels remain largely unmoved with only a 4.2 percent increase. These same factors are driving increases in director compensation in many industries, but before manufacturing board members see a significant increase in compensation,
Manufacturing
40% 40% 7% Board Retainers and Fees Committee Retainers and Fees Stock Awards Option Awards
Real Estate
Retail
Technology
“This long-term trend toward full-value share awards and away from stock options in director compensation is seen as aligning directors’ interests with those of shareholders, by giving directors a share in both upside growth and downside losses in the company’s stock value,” says Steve Zoellick, senior director with the Compensation and Benefits practice at BDO. “We expect to see this type of pay mix continue in the future.”
About BDO USA BDO is the brand name for BDO USA, LLP, a U.S. professional services firm providing assurance, tax, financial advisory and consulting 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 40 offices and over 400 independent alliance firm locations nationwide. As an independent Member Firm of BDO International Limited, BDO serves multinational clients through a global network of 1,204 offices in 138 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. © 2013 BDO USA, LLP. All rights reserved.
BDO 600
Board Director Compensation Trends in Middle-Market Manufacturing Companies BDO Manufacturing & Distribution Practice BDO has been a valued business advisor to manufacturing and distribution companies for more than 100 years. We work with a variety companies from all industrial sectors, ranging from global distributors to start-up and niche manufacturing corporations, on a myriad of accounting, consulting, tax and other financial issues. For more information on BDO USA’s compensation and benefits service offerings for the manufacturing and distribution industry, please contact one of the service leaders below:
Director compensation continues to climb across 600 middle-market companies in eight different industries, according to an analysis conducted by BDO USA, LLP, a leading accounting and consulting organization.
T
he BDO 600: 2012 Survey of Board Compensation Practices of 600 Mid-Market Public Companies examines director compensation trends in publicly traded companies with annual revenues from $25 million to $1 billion in the energy, healthcare, manufacturing, real estate, retail and technology industries; and publicly traded companies with assets between $50 million to $2 billion in the banking and financial services industries. Information for the study was drawn from proxy statements that were filed between May 15, 2011 and July 15, 2012. Continuing a trend from last year, board of directors’ pay increased in the manufacturing
sector, with average total compensation growing from $107,383 last year to $111,926 this year. Even with this 4.2 percent increase, board compensation in this sector still lags behind other surveyed industries, ranking fifth of eight industries studied in overall compensation. Board members in the technology industry received the highest average compensation at $177,249, up from $149,428, an 18.6 percent increase from the previous year. Despite trailing the other industry segments in total compensation, financial services banking and non-banking companies also saw significant upward movement with 13 percent and 10.5 percent increases, respectively, in compensation from last year.
Read more
Contact: Steve Zoellick, Senior Director Compensation and Benefits 404-979-7138 / [email protected] Howard Sosoff, Manufacturing & Distribution Practice Leader 414-287-1115 / [email protected] Matt Becker, Tax Partner 616-802-3413 / [email protected] Brian Eccleston, Assurance Partner 212-885-8220 / [email protected] John Fenton, Assurance Partner 404-979-7118 / [email protected] Stephen Ferrara, Assurance Partner 312-616-4683 / [email protected] Issy Kotton, Assurance Partner 310-557-8266 / [email protected] Fred Rozelle, Assurance Partner 248-244-6544 / [email protected] Rick Schreiber, Assurance Partner 615-493-5641 / [email protected] John Tucci, Assurance Partner 732-750-0900 / [email protected]
2
BDO 600 Board Director Compensation Trends in Middle-Market Manufacturing Companies
Board Director Compensation Trends by Industry – FY 2011 $200,000 180,000 160,000
$151,254
$148,272
$177,249
$125,498
140,000 120,000 100,000
$111,926
80,000
$110,844
$85,132
60,000
$57,426
40,000 20,000 0
Energy
Financial Services Financial Services – Banking – Non Banking
“Director compensation levels in the middle market continue to be differentiated by both industry and company size,” says Randy Ramirez, senior director with the Compensation and Benefits practice at BDO. “Higher compensation levels reflect the industries that are putting a premium on experienced and currently employed executives to serve as board members.”
u Manufacturing Compensation Levels Reflect Slow Economic Recovery Average total director compensation in manufacturing companies ($111,926) is just over half of that of the highest paying industries. The economic downturn affected the manufacturing industry at several points along the supply chain and recovery has been slow; and as a result, boards have been reluctant to increase director compensation.
Healthcare
economic conditions and shareholder returns will likely need to improve.
u Pay Mix Is An Even Split Director compensation is divided almost equally between cash elements, including board and committee retainers and meeting fees (47 percent) and stock compensation (53 percent). Directors at manufacturing companies saw a 17 percent increase in fullshare stock awards and a 17 percent decrease in stock option awards from the previous year. This trend is a reflection of the increased emphasis on directors’ fiduciary, risk oversight and governance roles, and the decreasing emphasis on directors’ role in driving company performance and growth.
Pay Mix: An Even Split
13%
u Industry Profitability
Challenges Compensation
The experience and qualifications needed to serve as a board member, as well as time requirements and legal and reputational risk all continue to increase, and yet director compensation levels remain largely unmoved with only a 4.2 percent increase. These same factors are driving increases in director compensation in many industries, but before manufacturing board members see a significant increase in compensation,
Manufacturing
40% 40% 7% Board Retainers and Fees Committee Retainers and Fees Stock Awards Option Awards
Real Estate
Retail
Technology
“This long-term trend toward full-value share awards and away from stock options in director compensation is seen as aligning directors’ interests with those of shareholders, by giving directors a share in both upside growth and downside losses in the company’s stock value,” says Steve Zoellick, senior director with the Compensation and Benefits practice at BDO. “We expect to see this type of pay mix continue in the future.”
About BDO USA BDO is the brand name for BDO USA, LLP, a U.S. professional services firm providing assurance, tax, financial advisory and consulting 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 40 offices and over 400 independent alliance firm locations nationwide. As an independent Member Firm of BDO International Limited, BDO serves multinational clients through a global network of 1,204 offices in 138 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. © 2013 BDO USA, LLP. All rights reserved.
