This report summarizes the Compensation Advisory Partners analysis of survey data collected in May 2019 in collaboration with Family Business and Private Company Director magazines.

Private companies face unique challenges relative to their publicly traded peers when compensating top officers and directors. Private companies lack publicly traded stock, which is a key component of top officer and director pay packages at public companies. Private companies face an additional and formidable challenge with regard to setting director pay: Little to no market pay data exists for board service at private companies. Because of the lack of competitive data, private companies often resort to using board pay levels at public peers, if any are available. Private company board pay programs have been based on a combination of the cash portion of public company director pay and the best judgment of decision-makers at the private companies.

To address this lack of competitive market data, Compensation Advisory Partners (CAP), and Private Company Director and Family Business magazines (both of which are published by MLR Media) worked together to survey private companies about their director pay programs. The response was enthusiastic, with more than 600 companies submitting data during the May 2019 survey period. This article provides a high-level summary of the survey data and describes how private companies can approach the design of effective and competitive board compensation programs.

Beginning with fiscal years ending on or after December 31, 2017, companies are required to disclose the ratio that compares the compensation of the CEO to the compensation of the median employee (pay ratio). This disclosure was part of the Dodd-Frank Wall Street Reform and Consumer Protection Act signed into law in 2010.

Compensation Advisory Partners LLC (CAP) researched early pay ratio disclosures. As of March 9, 2018, we obtained pay ratios from 150 companies with a median revenue of $2.1B from a cross-section of industries.

Pay Ratio

The median pay ratio disclosed by these companies is 87x. The lowest ratio is 1x (Apollo Global Management, Dorchester Minerals and The Carlyle Group) and the highest ratio is 1465x (Fresh Del Monte Produce Inc.).

Summary Statistics

Median Employee Pay

Median CEO Pay

Pay Ratio

75th percentile








25th percentile




As expected, the pay ratio correlates with company size, with larger companies disclosing higher ratios. CEO pay varies greatly depending on the size and complexity of the organization. Employee pay has less variability since it reflects the job function and does not vary significantly based on the size of the organization. The median ratio in our sample of 150 companies ranges from 20x for companies with revenue less than $500M to 218x for companies with revenue greater than $15B.

20x 54x 84x 157x 183x 218x <$500M $500M-$1B $1B-$5B $5B-$10B $10B-$15B >$15B Median Pay Ratio by Revenue Size

Few companies, 15, disclose a supplemental pay ratio with only a handful of companies (three) disclosing more than one additional ratio. These companies with supplemental ratios are typically adjusting the CEO’s pay which may exclude anomalies such as a one-time special bonus or equity award. Interestingly, three companies disclosed a higher supplemental pay ratio likely to provide context for a large year over year increase in the 2019 proxy statement.

Location of Disclosure

Nearly 70% of companies disclose the pay ratio after the Potential Payments upon Termination or Change in Control section of the proxy statement. Approximately 25% of companies disclose the pay ratio just before or after the Summary Compensation Table and a small minority, 5%, disclose it in the Compensation Discussion and Analysis (CD&A).

Pay ratio is typically not disclosed in the CD&A, signaling to shareholders that the pay ratio is not used to determine CEO pay levels. Additionally, around 25% of companies include language in the disclosure that the ratio should not be used to compare pay levels to other companies within the industry, region of the country or revenue size.

Measurement Date

The SEC’s final rules give companies the flexibility to use any date within the last quarter of the fiscal year to identify the median employee. Companies most commonly used the last day of the fiscal year or a date within the last month of Q4. It is also common for companies to use a day within the first month of Q4 to identify the median employee.

Measurement Month


Measurement Date


First Month of Q4


Last day of Q4


Second Month of Q4


First day of Q4


Third Month of Q4




Not Disclosed


Not Disclosed


Exclusions from Median Employee Determination

Approximately one-third of companies excluded a portion of their workforce when determining the median employee. The most common rationale is the de minimis exemption (approximately 55%) whereby a company can exclude up to 5% of its non-U.S. employee workforce. Companies also commonly cited an acquisition or corporate not responsible for setting pay (e.g., independent contractors) as rationales for excluding certain employee groups.


As more companies continue to file their proxy statements in the coming weeks, we will likely see larger pay ratios, particularly as companies with a significant part-time workforce begin to disclose their ratios. We do not anticipate an increasing trend in the number of companies filing supplemental pay ratios though it will be interesting to see the rationale for those that do. We expect to continue to see companies placing the pay ratio outside of the CD&A with most disclosing it after the Potential Payments upon Termination or Change in Control section.

This episode of NACD BoardVision examines the expectations that boards face when setting annual compensation goals. Christopher Y. Clark, Publisher of NACD Directorship Magazine and Kelly Malafis, Partner at Compensation Advisory Partners discuss best practices for rigorous goal setting.

Increasingly we find that private companies are adopting public company governance practices such as using formal Compensation Committees consisting of internal or external Board members. 

Unlike publicly traded companies where a Board Compensation Committee is a requirement, private companies establish formal Compensation Committees for reasons such as the desire for:

  • A more defined and objective process. This is welcome in delicate situations such as where there are conflicting shareholder interests that need to be aligned, or there is a perception that management has undue influence on setting their own pay levels.
  • Additional Board-level attention and/or external compensation expertise. This may be necessary when companies establish new key executive compensation plans or need to have one point of contact to negotiate employment contracts with key executives.

A Compensation Committee is able to take a “deep-dive” into specific compensation issues in a manner that would be more difficult and/or impractical with an entire Board.

Below we outline the key aspects of well-run Compensation Committees:

Purpose:  Typically, the Compensation Committee’s purpose is to carry out the responsibilities delegated by the Board relating to the review and determination of the performance and compensation of the Chief Executive Officer and the executive team.  Each company’s Board needs to decide whether the Compensation Committee itself has the authority to approve compensation decisions, or makes its recommendation for Board approval.

Membership:  Compensation Committees are usually comprised of a small select number of members, which can be a sub-set of the Board of Directors and can be supplemented by independent outside advisors, if desired.  As an example, one of our private company clients has a Compensation Committee which consists of internal Board members supplemented by an external compensation consultant and a long-time outside advisor.  Ideally, the Compensation Committee should include at least one member with compensation experience and/or a member with related, although not necessarily direct, subject matter expertise.

Duties:  The duties of the Compensation Committee are to review the compensation and performance of the Chief Executive and, to some extent (to be defined by each company), the members of the executive team.  The Compensation Committee also typically reviews compensation levels and plans (annual incentive, long-term incentive, supplemental benefit and perquisites) and major agreements (employment, severance, change of control, etc.).  It may also review non-executive officer compensation and broad-based plans on a periodic basis, as and when appropriate.  Increasingly, the role of CEO succession planning is also being assigned to the Compensation Committee.

Operations:  We recommend that companies establish a Compensation Committee Charter and Calendar.  The Charter specifies the Compensation Committee’s role, duties, responsibilities, and membership, as well as its operations (such as the number of meetings per year, review of its own performance, etc.).  The Calendar sets the schedule of topics to be addressed at each of its meetings throughout the year.  For instance, at the Q1 meeting, the Committee will review and approve salary increases for the upcoming year, bonuses for the prior year and equity grants.  Topics would also be outlined for the remaining fiscal quarters.  By having both of these documents, the purview and process of the Compensation Committee are clear to all constituents (Board members, shareholders, and management).

While it takes some time for private companies to recognize the benefits of establishing a Compensation Committee, we find that Boards come to appreciate having a dedicated and knowledgeable resource that can regularly address compensation issues on its behalf.

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