When it comes to benchmarking executives, proxy filings provide the cleanest and most readily available data. Yet, there are times when proxy data alone isn’t comprehensive enough when analyzing compensation for certain executive roles.
To illustrate the point, here’s an example of how your data may be skewed — and why that’s a problem.
Figure 1 below shows a Total Compensation report from Aon’s Compensation and Governance Professionals (CG Pro) for the Chief Information Officer (CIO) position using a Fortune 500 peer group.
Among the Fortune 500, only 38 CIOs are reported in a proxy filing. That means only 38 Fortune 500 companies have CIOs as one of the three highest paid named executive officers (aside from the CEO and CFO). Given the small representation of CIOs in proxy filings (just 8%), using this data would greatly overstate the pay of Fortune 500 CIOs, given that only the highest paid CIOs are represented in the proxy.
How to Dig a Little Deeper
If we stick with the CIO example, Aon’s Total Compensation Measurement (TCM) survey can provide access to a more comprehensive representation of CIOs. For example, among the Fortune 500 companies participating in TCM there is compensation data for 131 CIOs (vs. the 38 reported in proxy filings).
The benchmarking results also vary from the results you will get using proxy data alone. There are two contributing factors to this difference:
- The data is more current in TCM, and reflects current pay and long-term incentive awards vs. prior fiscal year information reported in the Summary Compensation Table of the proxy.
- TCM reflects pay for all CIOs, regardless of their pay rank within the organization.
Still Missing Some Important Peers?
By combining proxy and survey compensation data, Aon’s TCM Eclipse® tool will allow you to use broader and more up-to-date compensation survey data along with proxy filings — in essence, the best of both worlds. Using Eclipse, you can combine all the Fortune 500 participants in TCM with any non-participant’s proxy filings to create an enhanced report like the one in Figure 3 below.
Relying solely on proxy data would have suggested a base salary of $538,000 (at the median), but a more inclusive sample of CIOs from our TCM database suggests a base salary significantly lower at $425,000. Combining both proxy and TCM data with Eclipse provides a larger sampling of companies, and raises the base salary slightly to nearly $455,000.
For CEO and CFO roles, which are required to be reported, proxy data can be a great resource; the same is true for roles such as COO or Group President, since these are typically among the highest paid executives.
For other roles, however, it’s more effective to use survey data exclusively (like TCM) or as a supplement (with Eclipse) to your proxy benchmarking. This survey/proxy integration functionality can offer you quality and quantity — arguably the two most important factors that should determine data selection when benchmarking — in a single report. So now you’ll have a much bigger universe of job roles to pick from, making the data that much more powerful.
Ready to take your benchmarking to the next level? Contact us today to inquire about gaining access to CG Pro, the fundamental and unrivaled data tool for your compensation and governance needs, and to learn more about taking it one step further with TCM Eclipse.