Another difference between the CEO and the COO is the salary. Because CEOs are responsible for the well-being of the entire company, people in this position generally earn more than lower-level executives, such as chief operating officers. With access to extensive data on executive compensation practices and trends, CAP is in a strategic position to provide expert advice. CAP leverages its original surveys and research to help private, tax-exempt organizations address their compensation challenges.
While many companies are preparing for the SEC's new disclosure requirements, the ratios between CEO compensation and other NEOs are also something that companies should pay close attention to. Committees can use these ratios as a starting point for evaluating issues such as retention, talent development and succession planning. A high ratio can be an indicator that the CEO is taking on too much of the company, that there is a disconnect between the CEO's salary practices and those of other senior leaders, or that there is no established succession plan. An important factor in the acquisition and retention of talent is to have strong internal equity with adequate compensation ratios for managers and to take into account general market regulations.
Please note that the ratios used in this analysis are calculated based on the disclosure of powers. Therefore, if a chief operating officer or a general manager are not among the 5 highest paid, as required in the disclosure of powers, they are not included in the analysis that financial directors are required to disclose compensation. To assess market standards, Compensation Advisory Partners (“CAP”) conducted an analysis of the target salary ratios of senior executives among companies in the S&P 500 during the last three fiscal years (August 22, 2011). CAP also analyzed the salary ratios of S&P 500 senior executives by sector.
How do ISS and Glass-Lewis use salary ratios? Both representation consulting firms include the salary ratios of senior executives in their annual representation analyses. When do representation counselors perceive that there is a potential problem? Compensation Advisory Partners (CAP) is a leading independent consulting firm that specializes in compensation for executives and directors and in matters related to corporate governance. Our consultants have served as independent advisors to the boards of directors and senior management of many leading companies in the areas of compensation strategy and program design, promoting sound principles of corporate governance. If, ultimately, your goal is to fill one of these key positions, two to consider are that of executive director (CEO) and that of director of operations (COO).
Chief Executive Officers (CEOs) typically earn more in base salary than chief financial officers (CFOs), and CFO compensation is largely based on variable pay.