Practices

Total Compensation Study

In light of increased public and regulatory scrutiny surrounding executive pay, it is especially important to periodically look at compensation in totality. We focus on total compensation (cash and benefits), not just cash compensation, and do this better than anyone else. Since benefits make up 20-30% of the cost of total compensation (often more than incentive compensation), and since benefits often represent significant unfunded liabilities, it is important for boards to see the true cost of total compensation, and for executives to understand the value of each element. IRS regulations require that boards evaluate executive total compensation in order to minimize the risk of intermediate sanctions by establishing a rebuttable presumption that compensation is reasonable.

Executive total compensation should reflect your organization’s mission, vision, and strategy. Our methodology is to understand each organization in order to develop the appropriate compensation philosophy, program and structure. As each organization is unique, so must each compensation program be unique to that organization.

During our review, we will identify any opportunities for strengthening your executive compensation program. Our analyses include:

  • Establishing a compensation philosophy, including identification of appropriate peer groups, target percentiles and mix of pay
  • Identifying appropriate benchmark comparisons for each executive position
  • Selecting appropriate comparability data from our proprietary database for each position
  • Comparing the salaries paid by your organization to those paid by other organizations in your peer group
  • Developing a salary range for all positions
  • Comparing your incentive opportunities and their impact on total cash compensation to the incentive opportunities and total cash compensation available at peer organizations
  • Quantifying total benefit expenditures and comparing them, on a purely financial basis, to competitive practices within the health care industry
  • Reviewing specific benefit provisions to identify the competitive, financial and tax impact on the organization and its executives
  • Identifying issues related to compliance with changing tax laws affecting any element of compensation, including retirement benefits and deferred compensation
  • Comparing total compensation at your organization to total compensation of organizations in your peer group
  • Identifying opportunities for strengthening the program to support recruitment and retention
  • Making recommendations for better aligning the program with your mission and values, business strategy, and compensation philosophy
  • Reviewing best practices with respect to executive compensation in light of health care industry trends, federal and state tax laws, Section 4958 regulations and public reporting requirements

Our analysis will help you determine if your executive compensation program is competitive with market practices and consistent with the values of your organization.