People First HR Services

Executive Compensation – Can You Afford It?

Colleen Coates

With a tightening labour market and the demand for highly skilled executive talent, it’s no wonder more and more organizations are looking to review and revitalize their executive compensation programs. A recent compensation report published by People First HR Services shows that executive salaries are once again on the rise as companies work towards retaining their leaders. Keeping on top of executive compensation is particularly important where the talent pool is limited by factors such as demographics or seemingly unpleasant geographic nuances that some cities present.

Executive compensation continues to be a sensitive topic. It’s not surprising Boards, HR professionals and the executives themselves are apprehensive to openly bring up the subject given the growing scrutiny and doubting public opinion. However, executive compensation is not a topic that any company should shy away from, let alone ignore. Those responsible for executive compensation need to not only be educated on the topic, but also ensure they are engaging experts in the field to ascertain just what a competitive compensation program encompasses. Relying solely on anecdotal information or no information at all, leaves companies at risk of underpaying or overpaying. Companies have a duty to their shareholders/stakeholders to ensure that executive compensation is fair, reasonable and rewards risk appropriately.

If you are not convinced that your executive compensation program should undergo regular review, take a moment to consider the implications of losing a member of your executive team. Now there may be budgetary constraints, but companies can’t afford to be non-competitive on compensation. When a senior leader resigns, it inevitably impacts the organization’s ability to execute on its strategy. Not only is there an interruption in operations for the time that the position is vacant, but also while the new leader is getting up to speed. Then there’s the cost of recruitment as well as the potential impact on employee morale among other issues associated with their departure.

So what are your senior leaders worth?

A recent report published by People First shows that the average salary for a Chief Executive Officer in Manitoba private companies is $194,200 while the average Chief Financial Officer earns $137,500. In Saskatchewan, the average salary for a CEO is $424,800 and a top HR Executive is earns $224,871. Add to that another 30% to 50% annual bonus plus long term incentives, benefits and retirement savings and you have a well-rounded executive compensation program that if designed well will help drive organizational success – assuming you have the right talent in the driver’s seat.

Executive compensation in the public and non-profit sectors is equally important. These organizations should have a process in place to bring in external expertise to assist in setting executive wages to avoid the risk public criticism, tarnished reputations and even the demise of the organization. The stakes are too high to ignore and there is little tolerance for organizations who cannot clearly articulate the reasoning behind how much their executive team is compensated.

All organizations should review their executive compensation program on an annual basis to ensure it continues to meet the needs of the organization and is keeping pace with market changes. Executive salaries in Manitoba are expected to rise on average 3% in 2014, while Saskatchewan it is slightly higher at 3.7%. In addition to the annual review, the program should undergo a comprehensive review every three years.

If your organization cannot confidently explain how your executive compensation program compares to the defined market, then it’s time to gather up the details of your program, define your compensation philosophy and obtain reliable market data to assess your competitive positioning in the market.

An efficiently designed total compensation program is an important ingredient in an organization’s ability to recruit and retain a high performing executive team. A high performing executive team is imperative to being a high performing organization.