{"id":67356,"date":"2018-12-12T15:34:36","date_gmt":"2018-12-12T20:34:36","guid":{"rendered":"https:\/\/chiefexecutive.net\/?p=67356"},"modified":"2018-12-12T15:34:36","modified_gmt":"2018-12-12T20:34:36","slug":"executive-compensation-incentive-program-annually","status":"publish","type":"post","link":"https:\/\/chiefexecutive.net\/executive-compensation-incentive-program-annually\/","title":{"rendered":"Executive Compensation: To Compete, You Need to Update Your Incentive Program Annually"},"content":{"rendered":"<p><em><img fetchpriority=\"high\" decoding=\"async\" class=\"alignleft size-large wp-image-67359\" src=\"https:\/\/chiefexecutive.net\/wp-content\/uploads\/2018\/12\/AdobeStock_93188422-compressor-1024x591.jpeg\" alt=\"\" width=\"696\" height=\"402\" \/>This is the second in a series on executive compensation, based on findings from our exclusive <\/em><a href=\"https:\/\/compreport.chiefexecutive.net\/\"><em>2018-19 CEO &amp; Senior Executive Compensation Report for Private Companies<\/em><\/a><em>, which gathers data from over 1,600 private companies. It is the most authoritative resource in the U.S. for private company executive pay. <\/em><a href=\"https:\/\/chiefexecutive.net\/executive-compensation-mistakes-stop-treating-everyone-equally\/\">Part 1 is here<\/a><em>.<\/em><\/p>\n<p>When it comes to valuing, updating and communicating the benefits of executive compensation programs, there is a huge gap in best practices among American companies, largely based on size, and in an economy with plenty of options for talented executives in almost every industry, this can represent a significant\u2014and preventable\u2014risk that CEOs should not overlook.<\/p>\n<p>That\u2019s one of the key findings of our most recent <a href=\"https:\/\/compreport.chiefexecutive.net\/\">CEO &amp; Senior Executive Compensation Report for Private Companies<\/a>. Chief Executive Research surveyed 1,631 companies in April through June of 2018 about their 2017 fiscal year compensation levels and practices. We found that 93% of companies with a $1 billion+ in revenue had a formal long-term incentive plan with equity, updated annually. But among smaller companies, with revenue in the $10 million to $24.9 million range, only 54.67% had formal incentive plans in place.<\/p>\n<p><em><img decoding=\"async\" class=\"alignleft size-full wp-image-67358\" src=\"https:\/\/chiefexecutive.net\/wp-content\/uploads\/2018\/12\/comp-post-graphic-1.jpg\" alt=\"\" width=\"865\" height=\"488\" srcset=\"https:\/\/chiefexecutive.net\/wp-content\/uploads\/2018\/12\/comp-post-graphic-1.jpg 865w, https:\/\/chiefexecutive.net\/wp-content\/uploads\/2018\/12\/comp-post-graphic-1-600x338.jpg 600w\" sizes=\"(max-width: 865px) 100vw, 865px\" \/><\/em><\/p>\n<p>When you break it down by ownership type, there is another sharp divide: 85.71% of private-equity owned companies, for instance, have a formal, annual incentive program vs. only 57.58% of family businesses. The more profitable, faster-growing companies offer both short-term and long-term incentives.<\/p>\n<p>It\u2019s a clear disadvantage for smaller companies competing for talent. Even in small private companies that do have some kind of long-term incentive program in place, far too often our research finds that they are informal and don\u2019t get updated annually. This deprives the CEO of a powerful opportunity to rival the comp programs offered at public companies and bigger private companies as well.<\/p>\n<p>The problem can be compounded when CEOs don\u2019t communicate the value and progress of the program, leading executives to discount their value\u2014making them potential flight risks or headhunting targets.<\/p>\n<p><em><img decoding=\"async\" class=\"alignleft size-full wp-image-67357\" src=\"https:\/\/chiefexecutive.net\/wp-content\/uploads\/2018\/12\/comp-post-graphic-2.jpg\" alt=\"\" width=\"858\" height=\"480\" srcset=\"https:\/\/chiefexecutive.net\/wp-content\/uploads\/2018\/12\/comp-post-graphic-2.jpg 858w, https:\/\/chiefexecutive.net\/wp-content\/uploads\/2018\/12\/comp-post-graphic-2-600x336.jpg 600w\" sizes=\"(max-width: 858px) 100vw, 858px\" \/><\/em><\/p>\n<p>If you\u2019re a family business or someone who can\u2019t offer long-term equity, what can you do? There are few ways to offer incentives without offering equity. Here are a few suggestions:<\/p>\n<p>\u2022 Be more generous on salaries and long-term bonuses.<\/p>\n<p>\u2022 Come up with long-term incentive program alternatives to equity, such as synthetic equity. In this case, you can approximate stock, a stock plan or an option plan.<\/p>\n<p>\u2022 Mix in short and long-term bonuses plans based on performance.<\/p>\n<p>The most important rule: Whatever you do, make sure your plan aligns with the long-term goals of the company. And make sure you\u2019re loud and clear in communicating the value\u2014whatever it is\u2014to your team.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>There is tremendous value in offering your executives a long-term incentive program for compensation.  But if you can&#8217;t offer long-term equity, what can you do? There are few ways to offer incentives without offering equity. <\/p>\n","protected":false},"author":3190,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_oasis_is_in_workflow":0,"_oasis_original":0,"_relevanssi_hide_post":"","_relevanssi_hide_content":"","_relevanssi_pin_for_all":"","_relevanssi_pin_keywords":"","_relevanssi_unpin_keywords":"","_relevanssi_related_keywords":"","_relevanssi_related_include_ids":"","_relevanssi_related_exclude_ids":"","_relevanssi_related_no_append":"","_relevanssi_related_not_related":"","_relevanssi_related_posts":"","_relevanssi_noindex_reason":"","footnotes":"","_links_to":"","_links_to_target":""},"categories":[2199,2130],"tags":[],"class_list":["post-67356","post","type-post","status-publish","format-standard","hentry","category-compensation","category-talentmanagement"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v25.3 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Executive Compensation: To Compete, You Need to Update Your Incentive Program Annually<\/title>\n<meta name=\"description\" content=\"There is tremendous value in offering your executives a long-term incentive program for compensation. 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