executive benefi ts survey - hay group benefits survey contents introduction 3 executive retirement...

Executive Benefi ts Survey Results of the 2011 Executive Retirement Benefi ts & Perquisites Survey

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© 2011 Hay Group. All rights reserved. www.haygroup.com

2 Executive Benefits Survey

Contents

Introduction 3

Executive retirement plans 3

Nonqualified deferred compensation programs 6

Executive perquisite prevalence 8

Executive benefits in the future 9

Participant statistics 10

Survey participants 12



Introduction

In July and August 2011, Hay Group conducted a survey of executive retirement benefits and perquisites. Our primary objective was to obtain current data on the prevalence of practice regarding executive retirement, deferred compensation and perquisites for employers of all sizes and across a broad group of industries. Since we last conducted a survey on executive benefits more than 5 years ago, the struggling national and global economies, declining share prices and expanded proxy disclosures have created an intense public focus on executive benefits. This environment is causing boards of both for profit and not for profit organizations to focus more on the level and composition of executive benefit programs. Boards also want to structure their programs in a market-competitive manner that serves shareholders’ and/or public interests. An electronic survey questionnaire was made available to employees in a position to provide information on their companies’ executive benefits policies. Hay Group tabulated and sorted the results from 317 responding employers with median revenue of nearly $1billion. 16% of the respondents are tax exempt organizations.

Executive Retirement Plans

Nearly half of the participating organizations provide some type of nonqualified retirement plan, either defined benefit or defined contribution (refer to the bottom of this page for definitions). The table below shows not only the overall prevalence, but also the eligibility by executive group.

Executive Retirement Offered President &

CEO

Executive

and Senior

VPs

VPs Division

Heads

Based on

Compensation

Nonqualified Retirement Plan 49% 66% 57% 42% 17% 32%

Defined Benefit 32% 74% 69% 49% 26% 35%

Defined Contribution 31% 73% 72% 60% 37% 39%

Of those organizations that provide this type of benefit, one third provide both a defined benefit and defined contribution plan, while the remaining two thirds provide only one type of nonqualified retirement plan.

The trend away from defined benefit plans continues, in both qualified and nonqualified arrangements. The data may suggest that organizations with both a DB and DC arrangements have grandfathered executives into the DB program and offer a DC program to new executives.

Executive Retirement Plan Definitions

Nonqualified Retirement Plan

Supplemental executive retirement plans (SERP), such as top-hat plans or excess plans, which provide certain employees with additional retirement benefits. These plans may be free-standing plans that cover several executives or they may be part of individual executive employment contracts.

Nonqualified Defined Benefit Plan

Retirement plan that provides a fixed benefit at retirement based on a formula or target income percentage. The plan is not qualified under the Internal Revenue Code (IRC) and is usually in addition to a qualified defined benefit plan. This type of plan is designed to supplement defined benefit pensions and/or restore benefits in pension plans that are limited by ERISA.

Nonqualified Defined Contribution Plan

Retirement plan in which employers make fixed contributions toward retirement. The plan is not qualified under the IRC and is typically in addition to qualified defined contribution plans (401(k), 403(b), etc.) This type of plan is designed to supplement defined contribution plans and/or restore benefits that are limited by ERISA.



Prevalence of executive retirement plans differs by industry as the graph below illustrates.

59%

50% 47% 45%

32%

20%

0%

10%

20%

30%

40%

50%

60%

70%

Industrial Consumer Goods

Health Care Financial Tax Exempt Services

Pe

rce

nt

Industry

Executive Retirement Plan Prevalence by Industry

Organizations have a variety of reasons for providing a nonqualified retirement plan, as the table below shows.

Executive Retirement Plan

Objective

President

& CEO

Executive and

Senior VPs VPs

Division

Heads

Based on

Compensation

Make up for IRS Limits 74% 77% 71% 55% 32% 38%

Bring retirement income to a target

level 33% 87% 71% 44% 23% 15%

Include deferred compensation 32% 90% 80% 72% 38% 30%

Provide "golden handcuffs" to retain

executives 32% 82% 80% 45% 22% 16%

Recruit mid-career executives 26% 73% 78% 59% 32% 24%

Improve early retirement benefits 12% 79% 74% 47% 26% 26%

Include bonuses not covered in

qualified plans 12% 79% 63% 42% 16% 21%

Provide benefits for executives with

insufficient service 8% 75% 67% 42% 17% 17%

Provide retirement benefits to

executives with no qualifed plan 8% 77% 85% 31% 8% 8%

Maintain benefits from executive's

prior employer 6% 78% 67% 33% 22% 33%

"Keep whole" executive transferring

from subsidiaries or other countries 3% 75% 75% 50% 50% 25%



DEFINITION OF PAY

The definition of pay in nonqualified retirement plans is most typically base salary plus annual incentives.

Elements of Pay Included

Base Salary 92%

Annual Incentives 75%

Long-term Incentives 18%

Deferred Compensation 41% 52% of organizations with a nonqualified retirement plan have some type of funding in place.

Rabbi trust 72%

Life insurance 23%

Other 11%

Paid out in cash each year without gross-up for taxes 7%

Severance plan 4%

Paid out in cash each year with gross-up for taxes 2%

Secular trust 1%

Not-for-profit stock option plan 1%

Vehicle used to fund or secure plan

Definitions

Rabbi Trust A trust created for the purpose of supporting the non-qualified benefit obligations of employers to their employees. These trusts are sometimes referred to as "grantor trusts". Called a Rabbi trust due to the first initial ruling made by the IRS on behalf of a synagogue, these forms of trusts create security for employees because the assets within the trust are typically outside the control of the employers and are irrevocable.

Secular Trust A variation of the irrevocable Rabbi trust arrangement used with a nonqualified deferred compensation plan. Because the assets in a secular trust are not subject to the claims of creditors, it offers an executive more security than a Rabbi trust.



Nonqualified Deferred Compensation Programs

This section details the findings of voluntary deferred compensation programs, which may or may not have an employer contribution. Prevalence of deferred compensation programs is 53%, slightly higher than nonqualified retirement plans. Prevalence is also higher at lower executive levels.

Yes 53%

No 39%

Considering 5%

Not Considering 3%

Do you offer a nonqualified deferred

compensation plan to executives?

President & CEO 71%

Executive and Sr. VPs 71%

VPs 63%

Division Heads 43%

Based on compensation 43%

Who is eligible for the plan?

Code Section 409A imposed strict requirements regarding deferral elections, timing of payments and acceleration of payments on nonqualified deferred compensation arrangements. The impact of 409A may account for the relatively static prevalence of these types of arrangements. In addition, the restrictions placed on deferral elections and payment timing may have diminished the attractiveness of these types of programs. Participation in NQDC programs is on average 39%.

The elements of compensation that are eligible to be deferred under NQDC programs are as follows:

Base 89%

STI 79%

LTI - Cash 25%

LTI - Stock 9%

Restricted Stock 7%

What Type of Compensation is Eligible to be Deferred?

Just over one third of organizations are making company contributions to their deferred compensation programs.

Yes 36%

No 64%

Do you match deferrals?



Separation from service, death and disability top the list of criteria for payment of benefits, while lump sum payments and annual instalments are the most prevalent payment type.

Separation of Service 90% Lump Sum 94%

Death 84% Fixed Annual Installments 62%

Disability 70% Single or J&S Annuity 10%

Change of Control 48% Monthly Installments 10%

Specified Period of Time 45% Other 7%

Hardship 43%

Other 9%

What are the payment options under the NQDC

plan?

What are the criteria for payment of benefits under the

NQDC plan?

The most prevalent basis for crediting interest to participant accounts was found in the “other” category, as more than half the respondents in this category indicated that participants earn a rate of return based on their selected investments. Nearly all of the remaining respondents in this category mirror the return of the 401(k) plan funds, as elected by the participant.

Participant Directed Investments 30%

Stock Index 20%

Mirror 401(k) Plan Investments 17%

Bond Index 16%

Fixed Rate 13%

Treasury Note 11%

Prime Rate 11%

Company Stock 11%

Other 8%

What is the basis for interest crediting on NQDC deferrals?

With regard to funding, 54% of organizations have some type of funding arrangement in place for their NQDC program.

Informally funded 54%

Unfunded 44%

Considering 2%

Rabbi trust 69%

Life insurance 30%

Other 13%

Paid out in cash each year without gross-up for taxes 8%

Secular trust 2%

Not-for-profit stock option plan 0%

Severance plan 0%

Is the NQDC plan funded?

What vehicles are used to fund the NQDC?



Executive Perquisite Prevalence

The following perquisites are the most prevalent:

Cell phones / Blackberry

Company Car / Car Allowance

Severance Pay

Employment Contracts

Perquisites that show increased prevalence from prior surveys are Executive Physical Examinations and Executive Coaching.

Perquisites that have decreased in prevalence include Executive Medical Reimbursement and Country Club Memberships. Although still prevalent, Employment Contracts have also decreased in prevalence.

Executive Perquisites Offered President &

CEO

Executive and

Senior VPs VPs Division Heads

Based on

Compensation

Cellular Phones 79% 94% 87% 83% 67% 9%

Exec Severance Pay Practice 51% 87% 80% 58% 29% 8%

Employment Contracts 48% 19% 55% 23% 13% 8%

Exec Physical Exams 43% 96% 85% 55% 20% 4%

Golden Parachutes 42% 92% 83% 31% 13% 7%

Exec Parking 39% 95% 83% 56% 27% 1%

Exec Group Life Insurance 37% 88% 80% 57% 22% 10%

Exec LTD 37% 84% 80% 60% 26% 22%

Car Allowance 36% 78% 71% 56% 34% 4%

Average Car Allowance Amount $11,988 $10,921 $10,376 $11,187 $7,667

Personal Financial Counseling/Tax Prep 31% 95% 82% 40% 19% 6%

Company Cars 30% 93% 57% 38% 24% 4%

Home Office Equipment 29% 93% 66% 57% 29% 2%

Exec Vacation Policy 28% 92% 84% 75% 33% 6%

Executive Coaching 26% 92% 80% 52% 29% 5%

Country Club Membership 24% 94% 51% 27% 9% 8%

Company Aircraft - Personal Use 18% 95% 41% 10% 7% 2%

Key Person Life Insurance 18% 93% 56% 36% 15% 11%

Event Tickets or Boxes 16% 92% 71% 55% 35% 10%

Post-Emp Consulting Agreement 15% 63% 67% 41% 28% 15%

Airline Club Membership 15% 93% 67% 41% 20% 4%

Athletic/Fitness Club Membership 14% 93% 75% 64% 34% 11%

Exec Medical Reimbursements 13% 93% 79% 50% 24% 5%

Paid Spouse Travel Expenses 13% 93% 56% 20% 7% 5%

Luncheon Membership 13% 93% 65% 30% 13% 8%

Excess Personal Liability Insurance 11% 89% 83% 60% 29% 6%

Exec Retiree Medical 10% 91% 81% 59% 47% 6%

Chaffeur 10% 90% 27% 10% 3% 7%

Home Security 9% 89% 41% 11% 7% 7%

Apartments/Houses/Suites 8% 71% 50% 13% 4% 4%

Split Dollar Insurance 5% 73% 80% 53% 33% 13%

Exec Dining Room 4% 86% 64% 50% 36% 14%

Personal Legal Services 4% 92% 83% 67% 42% 8%

Sabbatical Leave 3% 88% 88% 88% 75% 13%

Dependent College Tuition 3% 63% 63% 63% 50% 25%

Executive Flex Plan 3% 88% 75% 75% 50% 25%

Average Executive Flex Plan Amount $24,800 $13,500 $6,750 $3,250 $6,000

With regard to tax gross ups of executive perquisites, 82% of respondents do NOT gross up any perquisites for tax purposes. Within the 18% of organizations that do gross up perquisites, car allowance is the most commonly grossed up perquisite.



Executive Benefits in the Future

Most organizations are not planning to change their current executive retirement and perquisite programs.

Executive

Retirement

Deferred

Compensation Perquisites

Yes 9% 15% 9%

No 91% 85% 91%

Install 10% 17% 7%

Improve 34% 41% 37%

Cut Back 24% 7% 30%

Are you expecting to make changes to your executive

benefits program in the near future?

If you have any questions about this survey, or would like more specific information, please contact your Hay Group consultant or Malinda Riley (312.228.1822).



Participant statistics

Data from 317 companies is included in this survey summary. Survey participants came from many industries, with consumer goods, industrial and financial organizations representing the majority of the group.

Industrial, 27%

Services, 22%

Health Care7%

Consumer Goods, 16%

Financial, 19%

2011 Executive Benefit SurveySurvey Partipants by Industry

317 total participants

Survey participants by ownership status

Of the 317 respondents, 16% are tax exempt organizations (public sector or not for profit).



Survey participants by annual revenues

Nearly one half of the participating companies have annual revenues of at least $1 billion.

<$50 Million, 16%

$50M - $99M, 4%

$100M - 249M, 11%

$250M - $499M, 10%

$500M - $999M, 9%

$1 Billion - $2.49B, 17%

$2.50 B - $5B, 11%

$5B - $9.9B, 7%

$10B -$19.9B, 5%

$20B or greater, 8%

2011 Executive Benefit SurveySurvey Partipants by Revenue

317 total participants



Survey participants (317)*

CONSUMER GOODS (52)

Ace Hardware

Advance Auto Parts

Art Van Furniture

Bunge

Cabelas

Cargill, Incorporated

Carlson Restaurants

Coca-Cola Bottling Co. Consolidated

Collective Brands, Inc.

ConAgra Foods, Inc.

Dollar General Corp

Dr Pepper Snapple Group

DSW Inc.

Finish Line

Flexi Compras Corp

Fossil

Gap Inc.

Haggar Clothing Co.

Hallmark Cards, Inc.

Helzberg Diamonds

Kao Brands Company

La-Z-Boy Incorporated

Limited Brands, Inc.

Limited Stores, LLC

Lowe's Companies, Inc.

MillerCoors

Nordstrom

Oxford Industries Inc

PepsiCo

Pier 1 Imports

PVH Corp.

Russian Standard Vodka USA, Inc.

Sears Holdings Corporation

Shopko Stores

Sonic Automotive, Inc.

Sports Authority

Stage Stores Inc.

Staples Future

Talbots, Inc.

Target Corporation

The Finish Line, Inc.

The Pampered Chef

The Pantry Inc

The TJX Companies, Inc.

Tiffany & Co.

Toyota Motor Sales, U.S.A., Inc

Toys "R" Us

Tupperware Brands Corporation

Tyson Foods, Inc.

ULTA Beauty

Zale Corporation

ZF Group NAO

FINANCIAL (61)

Alfa Mutual Insurance Company

Arkansas Blue Cross Blue Shield

Associated Bank

Babson Capital Management LLC

Blue Cross and Blue Shield of Kansas

Blue Cross Blue Shield of Michigan

Blue Cross Blue Shield of NE

Blue Cross Blue Shield of North Dakota

Boston Mutual Life Ins. Co.

Broadridge Financial Solutions

Capital One

CareFirst BCBS

Chemung Canal Trust Company

Citizens Financial Bank

Colonial Properties Trust

CUNA Mutual Group

Delta Dental of Kansas

Discover Financial Services

Equifax Inc.

FHNC

Fiducial Support Systems, Inc

First Citizens Bank

Florida Business Development Corporation

Fox Chase Bank

FWCJUA

ICW Group

Island Holdings, Inc.

IWIF

Kansas City Life Insurance Company

Lansing Trade Group, LLC

Legg Mason

MidCountry Financial Corp

Missouri Employers Mutual

Montana State Fund

Munich American Reassurance Company

Mutual of Omaha Insurance Co

OneBeacon Insurance

Penn National Insurance

Pinnacol Assurance

Protective Life Corporation

Regency Centers

RenaissanceRe

Ruane Associates Inc

San Antonio Credit Union

Securian Financial Group

State Street Corporation

Texas Mutual Insurance Company

The Ayco Co LP

The Bostonian Group

The Glenmede Trust Company

The PMI Group, Inc.

The Principal Financial Group

The Providence Mutual Fire Insurance Company

TMNA Services, LLC

UMB Bank

UMD

United Fire Group

US Federal Credit Union

Washington Real Estate Inv. Trust


WMayer & Associates

Workforce Safety & Insurance of ND

GOVERNMENT (11)

Bexar County

City of Anaheim

City of El Paso

City of St. Charles

DFW International Airport

Indian Prairie School District 204

Jackson County

Metropolitan Washington Airports Authority

Minnesota Department of Human Services

North Texas Tollway Authority

Town of Greenwich, Municipal Gov’t

HEALTH CARE (20)

American Dietetic Association

Beloit Health System

Burnett Medical Center

CIGNA

CRF Health

Daiichi Sankyo, Inc.

Emblem Health

Endo Pharmaceuticals

H. Lee Moffitt Cancer Center

Hope Network

Hospira, Inc.

Johnson & Johnson

Octapharma Plasma

Pfizer

Santen Inc.

Signature Healthcare

Southwest General Health Center

The Osborn

The Visiting Nurse Association of Texas

Woods Services

INDUSTRIAL (84)

Americas Styrenics

AOC, LLC

Apache Corporation

ARC International

Autoliv ASP, Inc.

Bacardi USA, Inc

Barnes Group Inc.

BNSF Railway Company

BreitBurn Management Company, LLC

Bridgestone Americas

Brunswick Corporation

Caterpillar Inc.

Celanese

Coca-Cola Inc.

COG Operating LLC

Conwed Plastics

Cranston Print Works Company

Curtiss Wright Corporation

Dayton Superior Corp

Delphi Corp

DHI

Dyno Nobel

Ebara International Corp

Elliott Group

Euramax International

Fechheimer Brothers Company

Freescale

FrieslandCampina (Thailand)

G&K Services

GEA WSUS

Glatfelter

Globe Speciality Metals

GROWMARK, Inc.

Haworth, Inc.

Hitachi Canadian Industries Ltd.

Holland 1916

Indiana Packers Corp

Ingersoll Rand

Intermatic, Inc.

IXYS Corp.

Johns Manville

J-W Energy Company

KB Home

Kongsberg Automotive

Lennox International

Link-Belt Construction Equipment

Luitpold Pharmaceuticals

Material Sciences Corp

Mitsui USA

Motorola Solutions

National Fuel Gas Company

Newmont Mining

Nitto Americas Inc.

NOVA Chemicals

OCTAL

Perfetti Van Melle USA

Plains Exploration & Production Company

Procter & Gamble

Puma Energy

Repsol

SABIC IP

Sasol North America Inc.

Snap-on Incorporated

Southco, Inc.

Southern Star Central Gas Pipeline, Inc.

Southwestern Energy Company

Spraylat Corporation

Stepan Company

Teknion Corporation

THAL ENGINEERING

The Hershey Company

TIDI Products LLC

Tomra of North America, Inc

Topcon

Tower International

Treatt USA

TriMas Corporation

Trouw Nutrition USA

United Technologies

Unitil Corporation

URS Energy & Construction

ViewCast Corporation

Wells Enterprise, Inc.

Williams International


NOT FOR PROFIT (9)

American Dental Association

National Cooperative of Health Networks

Association (NCHN)

NRA

Ohio Hospital Association

The Dayton Foundation

The Mind Research Network

The Society for Industrial and Applied Mathematics

(SIAM)

YMCA of Greater Rochester

YMCA of the Greater Tri-Valley

SERVICES (66)

3C

A.S.K. ASSOCIATES, INC.

Accor, North America

ACI Worldwide

Acme Services

American Family Insurance

American Student Assistance

Associated Press

AT&T

AutoNation, Inc

BI-LO, LLC

Brownells Inc

Campero USA

CCIM institute

CenturyLink, Inc

CH2M HILL

CHEP

Corner Bakery Cafe

Cornerstone On Demand

COUNTRY Financial

CSC

David C Cook Publishing

Day & Zimmermann

Delta Air Lines, Inc.

Denny's, Inc.

Design Group Staffing Inc.

DIRECTV

DLT&V Systems Engineering

ECG, Inc.

ES&S

FutureSense, Inc.

Gannett Fleming, Inc

Garden Fresh Restaurant Corp

General Parts International

Glacier Water Services, Inc.

Heat Transfer Research, Inc

ICBC

Interpublic Group of Companies

ipCG

JetBlue Airways

Kamehameha Schools

KBR

Laureate Education

Legal Sea Foods, LLC

LSG Sky Chefs

MRIGlobal

National Judicial College

O'Charley's Inc.

Odfjell

OSG Ship Management, Inc

PSEG

Severn Trent Services

Sprint

Staples

SuperMedia

Technip USA Inc

Texas Guaranteed

The Andersons, Inc

The Minto Group

The New York Times Company

Unisys

University of Alaska

Valere Consulting

VT Services, Inc.

W.W. Grainger, Inc.

Wagner Industries Inc.

UTILITIES/ENERGY (9)

Con Edison

Electric Reliability Council of Texas, Inc. (ERCOT)

Fayetteville Public Works Commission

Hibbing Public Utilities

Idaho Power Company

*Includes 5 undisclosed participants

Hay Group is a global management consulting fi rm that works with leaders to transform strategy into reality. We develop talent, organise people to be more eff ective and motivate them to perform at their best. Our focus is on making change happen and helping people and organisations realise their potential.

We have over 2600 employees working in 84 offi ces in 48 countries. Our clients are from the private, public and not-for-profi t sectors, across every major industry. For more information please contact your local offi ce through www.haygroup.com.

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Europe AmsterdamAthens BarcelonaBerlin BilbaoBirminghamBratislavaBrusselsBucharestBudapest Dublin

FrankfurtGlasgowHelsinkiIstanbulKievLilleLisbonLondon MadridManchesterMilanMoscowOsloParisPrague RomeStockholmStrasbourgViennaVilniusWarsaw ZeistZurich

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