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CEO Update LIVE: At-risk pay rising for association chief executives

Forum panelists say limited talent pool, other factors are driving bonuses higher

Compensation panel 2018
From left, Greg Needles, Lorraine Lavet and Charlie Quatt discuss executive pay trends.

Nov. 13, 2018
By William Ehart

Incentive pay for association chief executives is on the rise and the trend is likely to continue, a panel of experts said at the CEO Update LIVE: Executive Compensation forum today.

“(At-risk) pay at large trade associations is going up in some cases to almost 100 percent,” said Charlie Quatt, founder and president of compensation consulting firm Quatt Associates.

“But in a smaller organization … the CEO needs to have some base salary. So you have to start (with) a livable base salary that enables someone to afford to live in town and take care of the family. So the incentive is going to be a lot smaller, and it could be 10 or 15 percent,” Quatt said.

The other panelists were Greg Needles, partner at law firm Morgan Lewis, and Lorraine Lavet, head of the association practice at executive recruitment firm Korn Ferry. The event was held at The Willard InterContinental Hotel in Washington, D.C., and moderated by CEO Update Managing Director Mark Graham.

Lavet agreed with Quatt but said incentives are heading higher.

“The pressure actually is to go far north of (10 or 15 percent),” Lavet said. “I’m hearing that from professional societies and I’m definitely hearing it from trade associations.

“In this past year, a third of the CEOs that my practice placed were not from associations, and they weren’t politicians either. They were from industry,” Lavet said. “We’re seeing a flurry of new entrants into the market. And while they understand that these are nonprofits … they are coming with significantly bigger expectations. They’re not going to get what they're getting in their private sector situations, but it’s pushing boards to reconsider.”

Asked by Graham to pick an ideal level CEOs should seek for at-risk pay, Needles said, “Zero. They want it all in base, nothing at risk. But those days are over. From the compensation committees’ perspective, they’re going to want to put more at risk.”

While incentive pay may be in an uptrend, Graham noted it still has a way to go in the association space. Citing figures drawn from the just-released 2019 CEO Update Salary Guide, Graham said that 56 percent of associations with revenue of more than $1.7 million paid their CEOs bonuses.

However, only 41 percent paid their CEOs bonuses of greater than 10 percent of base pay, he said.