Compensation Advisory Partners (CAP) conducted a study of executive compensation trends in the banking industry. The study includes 18 U.S. banks with greater than $50 billion in assets across three groups: Money Center banks (n=4), Custody banks (n=3), and Super Regional banks (n=11). This report summarizes the findings of CAP's study, including the relationship between pay and performance in 2021, executive compensation trends, and outlook for the industry in 2022.

Key Themes

  1. 2021 Pay and Performance Outcomes
    Chief executive officer (CEO) compensation increased 21% at median, primarily through higher incentives. Increases in CEO pay were in line with strong 2021 earnings, which were buoyed by releases of loan loss provisions taken in 2020.
  2. Incentive Plan Design Trends
    All banks in this study considered Diversity, Equity and Inclusion (DE&I) progress as part of the annual incentive decision in 2021, typically evaluated on a qualitative basis.
  3. Special Retention Awards
    The use special one-time long-term incentive awards increased among large financial services companies, including the banks in our study, in 2021. These awards, in some cases, received pushback from shareholders and proxy advisory firms that resulted in lower Say-on-Pay outcomes.
  4. Looking Ahead
    The performance outlook for 2022 is less certain. Results may vary significantly based on business mix and balance sheet makeup.

2021 Pay and Performance Outcomes – Significant Pay Increases for Strong Results

The banks in CAP’s study had strong bottom line results in 2021. Earnings per share (EPS) and Return on Equity (ROE) improved significantly versus 2020 as the credit environment improved, and banks reversed pandemic-related loan loss provisions from 2020. Over the same period, Pre-Provision Net Revenue (PPNR), which does not include the impact of loan loss provisions, was down at median, though several banks in our study grew PPNR versus 2020 primarily through increases in fee income. 1-year Total Shareholder Return (TSR) was strong over this period. 2021 TSR for the banks in CAP’s study was +38 percent, at median, while the S&P 500 returned +29 percent.

The chart below summarizes median performance results for the banks in CAP’s study:


Median Percent Change

Year Ended
December 31, 2020

Year Ended
December 31, 2021

Earnings per Share



Pre-Provision Net Revenue



Return on Equity (Basis Point Change)

-371 bps

+527 bps

1-Year Total Shareholder Return



3-Year Total Shareholder Return (Cumulative)



Source: S&P Capital IQ Financial Database.

Median Change in CEO Compensation Money Center Custody Super Regional -9.6% 20.5% -2.1% 18.0% 4.7% 21.5% (15.0%) (10.0%) (5.0%) 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 2019-2020 2020-2021

In 2021, total direct compensation (i.e., the sum of base salary, annual cash bonus, and awarded long-term incentives), increased 21 percent, 18 percent, and 22 percent at median for the money center, custody, and super regional banks, respectively. Banks primarily delivered increases through incentive compensation. 2021 cash bonuses were up 36 percent at median as 2021 results surpassed target performance goals and improved significantly versus 2020 due primarily to the quicker than expected economic recovery and resulting releases of loan loss provisions. Several banks in CAP’s study even disclosed making negative adjustments to incentive plan payouts to recognize the benefit of the releases of loan loss provisions. This stands in stark contrast to 2020 where companies generally failed to meet targets set prior to the start of the pandemic and funded bonuses below target and below 2019 bonuses. Long-term incentives also increased significantly at median (i.e., +21 percent), compared to 2020 when banks increased long-term incentives more modestly (i.e., +5 percent at median).

+2.5% +6.9% +5.4% -5.8% +54.5% -58.4% (80.0%) (60.0%) (40.0%) (20.0%) 0.0% 20.0% 40.0% 60.0% 80.0% 2019-2020 2020-2021 Median Change in Compensation and Benefits Expense Compensation and Benefits Expense As % of Revenue As % of Net Income

Compensation and benefits expense increased on an absolute basis in both 2020 and 2021. However, as a percentage of revenue and net income, compensation and benefits expense increased in 2020 and decreased in 2021. This likely demonstrates that while 2020 was a challenging performance year, banks maintained a level of compensation necessary to retain key talent. In 2021, banks increased incentives to reward for improved earnings and recognize the intensely competitive talent market, but did so at a reasonable level relative to revenue and earnings growth.

Incentive Plan Design Trends – Focus on DE&I

Most banks in our study did not make changes to annual or long-term incentive plan metrics or structure in 2021. One area that continues to evolve is how banks tie incentives to Environmental, Social, and Governance (ESG) considerations. As companies and shareholders spend more time focusing on ESG strategies, companies are increasingly incorporating ESG metrics into incentive plans to support these strategies. To-date banks have primarily focused on DE&I in incentive plans. All of the banks in our study disclose considering DE&I achievements as part of the incentive decision-making process. Most banks include DE&I in the individual or strategic component of the annual incentive plan and evaluate results on a qualitative basis. Specific metrics include diversity in hiring, use of diverse suppliers, and employee engagement. Several banks in our study also disclose considering other ESG factors (e.g., aligning investing activities to climate commitments) as part of the annual incentive determination.

Special Equity Awards

We noted an increased use of special one-time equity awards among banks in 2021 and 2022 to-date. Such awards are typically reserved for special situations, such as supporting retention and incentivizing significant growth or business transformation. These awards, particularly those that provide executives with the opportunity to earn significant value, are often subject to longer-term vesting periods (i.e., five or more years) and payout based on the achievement of shareholder value creation goals. Shareholders and proxy advisory firms often push back on these types of awards, demonstrated by the decline in Say-on-Pay support in 2022 for many of the banks that granted special equity awards in 2021.

One notable example in our study is JPMorgan. The bank granted awards worth $53 million and $28 million to the CEO and President & COO, respectively, to support retention of these key leaders. The awards consisted of stock appreciation rights that vest after five years. Likely due to the significant value of these awards, both major proxy advisory firms, Institutional Shareholder Services (ISS) and Glass Lewis, recommended that shareholders vote against JPMorgan’s Say-on-Pay proposal and JPMorgan failed Say-on-Pay, receiving only 31% support from shareholders.

Looking Ahead to the Second Half of 2022

2021 was a strong earnings year for banks and executive compensation levels reflected that. The outlook for 2022 is less certain and performance results may vary significantly based on business mix and balance sheet makeup. Provision releases, which had a significant positive impact on bank earnings in 2021, will likely not be available to banks in 2022. Additionally, the rising interest rate environment, inflation, and macroeconomic uncertainty are expected to impact bank performance in 2022.

The Federal Reserve has increased interest rates significantly in 2022 and anticipates additional rate hikes in the second half of the year. Rising interest rates are expected to drive higher net interest income but decrease demand for loans. The degree to which the rate environment benefits 2022 earnings will vary by bank based on the sensitivity of the balance sheet to increases in interest rates and the cost of funds.

The volume and value of mergers and acquisitions (M&A) transactions are expected to decline in 2022 due to economic uncertainty, inflation, and rising interest rates. This will adversely impact fee income for investment banking businesses.

In light of these dynamics, the first half of 2022 told a different performance story than 2021. PPNR is slightly up at median, likely due to increased interest rates, and EPS is down at median without the benefit of provision releases. Total shareholder return through the second quarter for the banks in our study is down approximately 20% at median, commensurate with the S&P 500. At the same time, the current talent market is intensely competitive, particularly in key areas for banks such as digital and commercial banking. As we approach the end of 2022, banks will need to balance aligning pay with 2022 performance results and shareholder returns, which may be down versus 2021, with the need to attract and retain critical talent.

For questions or more information, please contact:

Eric Hosken
[email protected]

Mike Bonner
[email protected]

Stefanie Kushner
[email protected]

Theo Allen and Felipe Cambeiro provided research assistance for this report.

Banks in CAP’s Study (n=18)

Money Center Banks

  • Bank of America Corporation
  • Citigroup, Inc.
  • JPMorgan Chase & Co.
  • Wells Fargo & Company

Custody Banks

  • The Bank of New York Mellon Corporation
  • Northern Trust Corporation
  • State Street Corporation

Super Regional Banks

  • Citizens Financial Group, Inc.
  • Comerica, Inc.
  • Fifth Third Bancorp
  • Huntington Bancshares, Inc.
  • KeyCorp
  • M&T Bank Corporation
  • The PNC Financial Services Group, Inc.
  • Regions Financial Corporation
  • Truist Financial Corporation
  • U.S. Bancorp
  • Zions Bancorporation

CAP periodically publishes a study on compensation for Chief Financial Officers (CFOs) relative to Chief Executive Officers (CEOs). Our analysis for fiscal 2020 compensation is based on a sample of 135 companies with median revenue of $12 billion. Additional information on criteria used to develop the sample is included in the Appendix.

Study Highlights

Pay Component


Base Salary

  • Prevalence of base salary adjustments in 2020 for both CEOs and CFOs was approximately 10% lower compared to prior years. Overall, 44% and 55% of companies made increases in 2020 for CEOs and CFOs, respectively
  • Among companies that made salary increases, the median CEO increase was 4.1% and median CFO increase was 4.3% These increases were generally in line with prior year’s increases (3.6% and 4.0%, respectively)
  • Among the total sample, median increase for CEOs was 0%, a decrease from 2.5% last year and median increase for CFOs was 2.7%, similar to 3.0% last year


  • Among our sample, approximately half of the companies had lower bonus payouts in 2020 and approximately half had higher bonuses. Therefore, the median change in actual bonus payouts was 0% for both CEOs and CFOs.
  • While bonus payouts were almost evenly distributed between increases and decreases, the range of bonus payouts between 25th and 75th percentiles was wider in 2020
  • The bonus payouts were mostly aligned with company performance during 2020
  • Median target bonus opportunities remained unchanged for both CEOs (150% of salary) and CFOs (100% of salary), with the median CEO target bonus level unchanged for the last 7 years

Long-Term Incentive (LTI)

  • LTI opportunities increased 5.3% for CEOs and 8.7% for CFOs, which were generally in line with CEO and CFO increases last year (6.1% and 8.3%, respectively)
  • Due to SEC disclosure requirements of LTI awards, the awards captured in this analysis represent awards made before the COVID-19 pandemic

Total Compensation

  • Median 2020 increases in actual total direct compensation (i.e., cash plus equity) for CEOs and CFOs were 3.3% and 4.1%, respectively, indicating more modest increases for CEOs compared to the prior year (4.4% and 3.6% for CEOs and CFOs, respectively) primarily due the impact of bonus payouts in 2020
  • Similar to prior years, the CFO total compensation continues to approximate one-third of CEO total pay

Pay Mix

  • The emphasis on variable pay over fixed pay, and performance-based equity over time-based equity continues
  • LTI mix shifted slightly (about 5%) towards more time-based equity compared to 2019. We believe the trend of slightly higher emphasis on time-based equity will continue into 2021, however, performance-based equity (performance plans and stock options) will represent at least two-thirds of total LTI

Study Results


In 2020, the salary increase prevalence declined by about 10% from historical practice. We believe the COVID-19 pandemic was the main factor for the decrease. However, salary increases were still quite prevalent for CEOs and CFOs, at 44% and 55% of the sample, respectively. As indicated in the charts below, median 2020 salary increases were 2.7% for CFOs (or 4.3% for those receiving an increase) and 0% for CEOs (or 4.1% for those receiving an increase).

2020 Salary Increases

0.0%0.0%4.0%0.0%2.7%5.1%25th PercentileMedian75th PercentileCEOCFO2.9%4.1%8.5%3.0%4.3%8.0%CEOCFO25th PercentileMedian75th PercentileAll CompaniesOnly Companies with Increases

Changes in Actual Pay Levels

The actual total cash compensation for 2020 was generally flat among our sample with only CFOs seeing a minor salary increase in salary levels. On a total compensation basis (including long-term incentive awards), the median rate of increase continued to trend lower for CEOs and was generally flat for CFOs (3.3% for CEOs and 4.1% for CFOs).

Median Percentage Change in Pay Components


Pay Components

2017 – 2018

2018 – 2019

2019 – 2020














Actual Bonus







Long-Term Incentives







Actual Total Direct Compensation







As indicated above, the sample had approximately the same number of companies with bonus increases (64 CFOs and 60 CEOs) and decreases (65 CFOs and 60 CEOs). A small number of companies had the same exact payout for two straight years (6 CFOs and 15 CEOs).

Bonus payouts were generally aligned with performance outcomes for most companies. For example, of the companies with a bonus decrease, over 60% had a decrease in operating income during 2020 and over 80% of companies with a bonus increase had higher operating income during the year. Bonus payouts were also aligned to revenue and TSR performance for the year.

Median Total Compensation Increase by Industry1


Median total compensation increases varied by industry. In 2020, Consumer goods (Staples and Discretionary) industries and IT companies generally experienced higher compensation increases compared to other industries.

Target Pay Mix

The pay program structure for CEOs and CFOs has remained largely unchanged since 2011. CEOs continue to receive less in the form of salary and more in variable pay opportunities, especially LTI, than CFOs.

18%18%18%17%19%24%22%26%63%58%60%57%2019202020192020Stock OptionsTime Vested Restricted StockPerformance PlansCEOsCFOs

Target Bonuses

Target bonus opportunities as a percentage of salary remained unchanged for the CEOs in the sample. For CFOs, the 25th percentile increased to 90% of salary from 80% last year. We expect target bonuses will continue to remain largely unchanged.

0.0%20.6%8.3%6.4%-0.2%1.2%4.8%-1.1%3.2%3.4%18.7%4.1%10.9%-12.1%7.9%4.0%-2.8%4.0%-15.0%-10.0%-5.0%0.0%5.0%10.0%15.0%20.0%25.0%30.0%Financials(n=32)Consumer Staples(n=6)InformationTechnology (n=11)ConsumerDiscretionary (n=18)Energy (n=7)Industrials (n=21)Utilities (n=12)Health Care (n=12)Materials (n=12)CEOCFO

Long-Term Incentive (LTI) Vehicle Prevalence and Mix

The use of two different vehicles to deliver LTI remains the most prevalent approach, used by almost 60% of companies. Approximately 30% of companies in the sample use all three equity vehicles (stock options, time-based stock awards, and performance plan awards).

The portion of LTI awards granted in Performance plans decreased slightly in 2020 at the expense of higher time-based awards. The stock option portion remained unchanged. Even though most of the awards in the analysis were granted before the onset of the COVID-19 pandemic (due to disclosure rules), the minor increase in time-based awards was expected.

140%140%150%150%200%200%20192020CEOs80%90%100%100%120%130%CFOsMedian ValueRange between 25th and 75th percentilesTarget Bonus as a % of Base Salary


Financial performance in 2020 fell compared to prior years. Revenue declined 1% at median and operating income increased 1% – below 2019 increases of 3% and 5%, respectively. In a typical year, performance at these levels would have likely resulted in more meaningful compensation decreases. The COVID-19 pandemic was a shock to the system with many companies evaluating the impacts of the pandemic at the end of the year and adjusting performance results for annual incentive calculations, since annual incentives are typically paid to a broader employee population than are long-term incentives. The total cash compensation outcomes for 2020 (i.e., flat bonus payouts on weakened absolute financial performance) continue to reinforce the alignment of pay outcomes with a broader view of company performance.

Since many companies made equity grants early in 2020, prior to the impact of the pandemic on the stock market, we may not see the pandemic’s impact on LTI levels until the 2021 grants are disclosed.


Sample Screening Methodology

Based on the screening criteria below, we arrived at a sample of 135 public companies with median 2020 revenue of $12B.


At least $5 billion in revenue for fiscal year 2020

Fiscal year-end

Fiscal year-end between 9/1/2020 and 1/1/2021

Proxy Statement Filing Date

Proxy statement filed before 3/31/2021


No change in CEO and CFO incumbents in the past three years


All industries have been considered for this analysis

1 Excludes industries which had a sample of fewer than five companies. Total compensation equals the sum of base salary, actual bonuses, and LTI awards granted in 2020.

This report is a summary analysis of a joint study by Compensation Advisory Partners, Family Business and Private Company Director magazines.

Summary Report

Compensation Advisory Partners (CAP) and MLR Media launched the first-ever Family Business Executive Compensation Survey in 2020. CAP, an independent executive compensation consulting firm, and MLR Media, the publisher of Family Business Magazine, launched the survey to collect data on the executive compensation levels at family companies and to understand the pay practices unique to these businesses. The survey drew responses from more than 300 family-owned businesses representing a broad range of revenue sizes and industries.


Key survey findings include:

  • The top executive positions of Chief Executive Officer (CEO) and President are held predominately by family members. In contrast, specialized functional roles, such as Chief Financial Officer and Chief Legal Officer, tend to be held by non-family members.
  • Among the survey respondents, the CEO position is most often held by a family member across all company revenue ranges – even at companies with greater than $500 million in revenue.
  • Compensation programs do not vary between family and non-family members at most survey respondents. The majority of companies offer participation in short- and long-term incentive programs to both family and non-family executives. Greater differentiation occurs for long-term incentives because family executives often hold equity ownership in the business, which provides profit-based distributions and dividends.
  • Family-owned businesses spend a median of 10 percent of operating income on short-term incentives, which is higher than the spend at other privately held companies. Short-term incentive payments are most often based on company profitability. Beyond profitability, the performance measures used by family companies vary widely. The second most common performance measure is individual performance, indicating that subjectivity plays a role in short-term incentives at many family businesses.
  • Long-term incentives are offered by approximately half of the family-owned companies surveyed. The most common long-term incentive vehicles are cash-based performance plans and phantom stock plans.
  • The survey asked about dividends to shareholders to understand potential income to family executives who hold equity ownership. Dividends are paid to shareholders at 70 percent of survey respondents. Dividends paid in 2019 were 14.4 percent of net income at median. Given the impact of COVID-19, dividends were estimated to be lower in 2020, at 10 percent of net income at median.
  • About one-third of the family businesses surveyed took executive compensation actions in response to COVID-19. The most common action was to suspend salary increases and bonus payouts. Another common human capital action was to reduce the workforce either permanently or through temporary furloughs.

About The Survey Participants

More than 300 companies responded to the survey, representing a broad range of industries and revenue sizes. Manufacturing is the most prevalent industry in the survey (one-third of respondents), followed by real estate and rental and leasing; agriculture, forestry, fishing, and hunting; construction; wholesale trade; and retail trade.

Participating companies span all different sizes. Exhibit 1 shows the distribution of responses across different revenue ranges.

Exhibit 1

53505650423122100102030405060Less than$10 million$11-$25million$26-$50million$51-$100million$101-$250million$251-$500million$501 millionto $1 billionGreater than$1 billionNumber of Participants N=314Revenue RangeParticipants by Revenue

The survey drew participation from companies with one to more than six generations of active family ownership. Exhibit 2 shows the distribution of revenue across generations. (Generations 4, 5 and 6+ are aggregated in the exhibit.) Not surprisingly, mature family businesses that have been in operation for many generations tend to have higher revenue, as Exhibit 2 illustrates.

Exhibit 2

68%57%36%32%16%26%40%37%16%17%24%32%0%10%20%30%40%50%60%70%80%90%100%G1(n=99)G2(n=167)G3(n=121)G4+(n=76)Revenue Size by Generation of Active OwnersLess than $50M$51M - $250MGreater than $250M

Approximately 75 percent of participating companies are S or C corporations. Ninety-five percent of participating companies are based in the United States and Canada. All survey results are denominated in U.S. dollars.

Compensation Practices

The survey asked participants to provide compensation data (salary, short-term incentives, and long-term incentives) for 10 executive positions. Median compensation data for the total sample are shown in Exhibit 3. (The detailed report for survey participants includes data for each component of compensation, and also shows compensation data by revenue range).

Exhibit 3

Median Compensation Data for All Companies


Total Direct Compensation

Chief Executive Officer




Chief Legal Officer


Chief Operating Officer


Chief Financial Officer


Chief Sales Officer


Business Unit (or Sector) Head


Chief Human Resource Officer


Chief Information Technology Officer


Note: Insufficient data were available to report Chief Investment Officer compensation levels.

Company size is correlated with the level of executive pay at family businesses, as shown in Exhibit 4. As a company’s revenue increases, the complexity of operations and the responsibilities of the executives also increase, necessitating higher pay to attract and retain executive talent.

Exhibit 4

Revenue Range$184$300$280$457$535$940$1,000Sample Median$425$0$200$400$600$800$1,000$1,200Less than$10M$11-25M$26-50M$51-100M$101-250M$251-500MGreater than$500MTotal Direct Compensation ($000s)CEO Total Direct Compensation by Revenue

Family and Non-Family Executives

The survey asked respondents to indicate whether a position was held by a family member or not when providing compensation information. As shown in Exhibit 5, the two executive positions of CEO and President tend to be held by family members. In contrast, specialized functional roles tend to be held by non-family members. In addition, as shown in Exhibit 5, smaller companies have greater family representation in the executive ranks than larger companies. The results are not surprising: Smaller companies tend to rely on family member “sweat equity.” As companies grow, they hire talent from outside the family, particularly to gain specialized functional expertise. One surprising result is that the CEO position is held by a family member across all revenue ranges – even at companies with greater than $500 million in revenue.

Exhibit 5

Percent of Positions Held by Family Members by Revenue


Less than $50M

$51M to $250M

$251M to $500M

Greater than $500M

Chief Executive Officer or President





Functional Heads





Average of All Positions





Note: Functional Heads reflect the following positions: Chief Financial Officer, Chief Sales Officer, Chief Legal Officer, Chief Information Technology Officer, and Chief Human Resources Officer.

Given the predominance of either family or non-family members holding a specific role, differences in total compensation for family and non-family executives cannot be meaningfully measured, except for select positions.

The President position and Chief Operating Officer (COO) position have more even distributions of family and non-family incumbents in the roles than other survey positions. To help control for company size, the two positions were analyzed by looking at pay for the President and COO roles as a percentage of CEO compensation in the same company.

  • President: Base salaries for both family and non-family Presidents are about 95 percent of the CEO’s salary at median. The family President earns up to 15% less in total compensation than the non-family President. In fact, a non-family President’s total compensation exceeds that of the CEO at several family-owned companies responding to the survey. These findings indicate that family businesses that hire non-family Presidents view these incumbents as similar in value to the CEO. One explanation is that family businesses hire Presidents for succession-planning purposes to prepare a non-family member to eventually take over the top position.
  • Chief Operating Officer: In contrast to the President position, family members in the COO role typically earn up to 15% more in base salary and total compensation than non-family members in the same role. A potential explanation is that families strive for greater pay equity between family members on the executive team.

The survey asked respondents whether family and non-family members were treated the same when receiving short- and long-term incentives. The majority of companies offer participation in short- and long-term incentive programs to both family and non-family executives.

There is more differentiation in participation for long-term incentives for family member executives, which is not surprising since family members are more likely to be shareholders and, therefore, be eligible for dividends or profit distributions. Long-term incentives are more likely used for non-family members to attract and retain talent, and to align the executives with company and shareholder objectives.

Short-Term Incentives

Short-term incentives are an important tool for rewarding performance and focusing executives on the near-term objectives of the business. The respondents provided their companies’ approximate budgets for short-term incentives as a percentage of operating income. At median, short-term incentive spending was 10 percent of operating income.

CAP has assessed short-term incentive spending as a percentage of operating income at privately held companies over the past decade. Privately held companies have historically spent 6 percent to 6.5 percent of operating income on short-term incentives at median. With a higher spend relative to other private companies, family companies emphasize short-term incentives as an important way to motivate and reward executives and employees.

The survey respondents report using a broad array of performance measures to determine payouts. More than half of the respondents use a profitability measure in determining short-term incentive payouts. Beyond profitability, no other performance measure stands out as a prevalent practice. Exhibit 6 below shows the top five most prevalent performance metrics at family businesses.

Exhibit 6

Most Common Short-Term Incentive Performance Metrics

Ranked by prevalence

1. Profitability Measure (net income, operating income, etc.)

2. Individual performance

3. Operational objective(s)

4. Revenue

5. Strategic objectives(s)

After profitability, individual performance is the next most common performance factor, which indicates that subjectivity plays a role in short-term incentive decisions. Other common metrics are operational objectives, revenue, and strategic objectives. The broad array of performance measures favored by family businesses indicate that they assess their performance more holistically than privately held and publicly traded peers, which strongly emphasize profitability and financial performance in their short-term incentive programs.

Long-Term Incentives

Long-term incentives are granted to attract and retain executives and focus them on sustainable value creation and maintenance of the long-term health of the business. Long-term incentives, such as restricted stock, stock options and long-term cash incentive plans, are widely known because of their use at public companies and the significant values they can deliver.

At publicly traded companies, long-term incentives are almost universally offered to top executives. In contrast, privately held companies do not have liquid stock with daily valuations that they can use as executive incentives. Given this limitation, the prevalence of long-term incentives is approximately 60 percent in privately held companies. In addition to the long-term incentives mentioned above, privately held companies offer phantom equity, stock appreciation rights (i.e., phantom stock options), profit interests and deferred compensation.

The prevalence of long-term incentives at family-owned companies is less than that of other privately held companies. Only half of the family businesses surveyed offer long-term incentives to executives (see Exhibit 7). The prevalence is lower than at other privately held companies because family businesses are often reluctant to share real ownership or economic value with executives outside the family.

Exhibit 7

Yes50%No50%Are long-term incentives used at your company?N=244

Exhibit 8 below shows the top 3 most prevalent long-term incentive vehicles at family-owned companies. These companies predominately favor cash-based vehicles.

Exhibit 8

Top 3 Long-Term Incentive Vehicles



Performance cash plan


Phantom stock (long-term performance cash tied to company value)


Restricted stock or restricted stock unit (actual ownership)


In the family businesses that have long-term incentive programs, the most common practices are to grant awards annually, and to have vesting or performance periods spanning three or five years.

Without a public market to provide liquidity or a valuation for equity, private companies must decide on how to provide these features in their plans. To value equity, family businesses typically use an established formula or an outside, independent appraisal. These companies typically provide liquidity upon an executive’s termination or upon vesting of the award.

The companies surveyed report modest pools for the sharing of value creation relative to publicly traded peers. More than half of the respondents with equity-based long-term incentive plans report pools of 10 percent or less of total shares outstanding.

Dividend Practices

The survey asked family businesses about their dividend payment practices to understand the income potential for executive shareholders. Of the survey respondents, 70 percent pay dividends to shareholders (see Exhibit 9).

Exhibit 9

Yes70%No30%Does your company pay dividends?N=248

In 2019, companies paid out 14.4 percent of net income at median to shareholders. Given the impact of the COVID-19 pandemic, companies anticipate paying smaller dividends in 2020.

Larger Family Businesses (Greater than $500 Million in Revenue)

Competing with publicly traded companies for executive talent is a particular concern for large family businesses. In reviewing the survey responses of companies with greater than $500 million in revenue, a few distinctive compensation practices emerge:

  • Higher pay positioning – Larger businesses tend to have an above-median pay positioning for base salary and total compensation compared to smaller counterparts. This higher positioning for total compensation is achieved, in part, by short-term and long-term incentives.
  • Short-term incentives – Larger businesses provide higher maximum short-term incentive opportunities (150 percent to 200 percent of target) and budget a higher percentage of operating income for short-term incentives.
  • Long-term incentives – Over three-quarters of larger family businesses offer long-term incentives to their executives. Long-term incentives are typically granted annually, and the grants are limited to the senior executive group.
  • Budgeted salary increases – While smaller organizations tend to have a wider range of annual budgeted salary increases, larger companies’ budgeted increases center around three percent.

The Impact of COVID-19

Participants were asked to provide information about any actions taken in response to COVID-19. Approximately one-third of the respondents indicated that they took executive compensation actions because of the pandemic. Of the respondents that reported broader COVID-related actions, the most common were:

  • Suspended pay raises or bonus payouts (46%)
  • Reduction in workforce (40%)
  • Furlough of employees (32%)
  • Reduced base salary (30%)
  • Suspended or reduced dividend payments (24%)

The most common durations of the COVID-related actions are indefinite/to be determined (31% of companies), the duration of the pandemic (22%) and through the end of 2020 (21%).

Looking Ahead

COVID-19 made 2020 a challenging and unprecedented year. As a result of the pandemic, companies had to modify their business strategies to meet an array of challenges: ensuring employee safety or managing a remote workforce, managing disrupted supply chains, and responding to the ongoing economic uncertainty. In turn, compensation strategies were also modified.

Given COVID-19, 2020 was not an ideal year to launch a new compensation survey. The compensation data presented in this report may have been impacted by these challenges. As a result, CAP and MLR Media plan to conduct the second iteration of the Family Business Executive Compensation Survey in summer and fall of 2021. In this next iteration, we will be able to evaluate trends in compensation practices and continue to provide executive compensation benchmarking data to family businesses as they transition to normalcy.

Survey Contacts

For information on participating in the next survey, please contact:

For information on the survey analysis or for any executive compensation-related questions, please contact:

2020 was a particularly robust year for initial public offerings (IPOs) and special purpose acquisition companies (SPACs). Many companies took advantage of favorable capital markets, and we saw much-anticipated IPOs such as Snowflake, DoorDash and Airbnb hit the public markets in 2020. Founders, employees, and investors unlocked significant value in these IPO events.

CAP’s review of technology company equity practices around IPO reveals several emerging compensation trends: a shift in equity award vehicles from stock options to restricted stock units (RSUs), increased use of double-trigger vesting for restricted stock, and large, company-friendly equity authorizations. Additionally, some companies implemented noteworthy founder compensation practices.

Pre-IPO Equity Grant Practices

CAP reviewed a sample of 20 high-profile, technology companies with IPOs in recent years to understand their equity practices leading up to the IPO.

List of companies:

Airbnb Fitbit Palantir Slack Square
Asana GoPro Peloton Snap Uber
DoorDash Grubhub Pinterest Snowflake Unity Software
Dropbox Lyft Roku Sonos Zoom Video

Options are still predominant. For companies anticipating growth, options continue to be the favored equity award for a variety of reasons. For employees, there is no tax burden at vest, and the employee has control over the settlement of the award and associated taxation. If incentive stock options (“ISOs”) are used, the employee receives capital gains treatment upon disposition of shares, assuming the required holding period is met. Options are also favorable from the shareholder (often financial sponsors) perspective. Options align the interests of employees with their shareholders, as no award value is realized unless the company value appreciates. Typically, stock options are granted at-hire and allow employees to share in the value of the company as it grows and matures.

Increased use of RSUs with unique features. Some companies (such as Lyft, Uber, and Dropbox) shifted to granting more RSUs in the years leading up to IPO. In these cases, RSUs have double-trigger vesting, which requires both time-based service (typically four years) and event-based requirements (typically a qualifying capital event such as an IPO) be satisfied in order for the RSUs to vest.

Companies naturally shift from granting options to RSUs as they grow and mature. Reasons for this include changes in a company’s growth expectations post-IPO, the need to conserve shares, and a desire for differentiated equity grant programs as companies grow in size and complexity. However, as seen with recent IPOs, favoring RSUs could be attributed to the fact that award values are easier to understand and are somewhat protected, even if company valuations fluctuate between funding rounds. Companies also benefit, from an accounting perspective, with vesting being dependent on a qualifying capital event as no accounting charge is incurred until such event takes place.

Adopting double-trigger RSUs has potential downsides, though. These include mounting pressure to go public (as evidenced by media coverage of the long-delayed IPO of Airbnb), and a significant tax burden for employees whose equity vests upon IPO. Employees are exposed to the financial risk of being taxed on stock compensation that has since declined in value since IPO. Also, when employees leave the company before the IPO event, their unvested shares are forfeited. This may pose an issue for recruitment unless the IPO timeline is clear. For the company, event-based vesting triggers a major accounting expense, and the large number of shares being sold may temporarily impact the company’s share price.

Options Only15%Mix of Options and FullValue Shares85%Prevalence of Equity Types Used Prior to IPO

Note: No companies in the sample granted only full value shares prior to IPO.

Equity Authorization Pre- and At-IPO Practices

Before going public, companies often need to adopt multiple equity plans for incentive purposes. Not surprisingly, long time horizons and numerous funding rounds before IPO require companies to authorize additional equity share pools for compensation purposes. Private company investors are asked to approve incentives so that the company has enough “dry powder” to scale the executive team and grow its employee base. At median, equity overhang1 pre-IPO is 21.5% among the sample group.

In conjunction with the IPO, most companies (95% of companies in the sample), asked for an additional equity authorization. Median at-IPO overhang is 27.7% of common shares outstanding (CSO). In addition to the share request, companies often seek annual evergreen provisions (typically 5% of CSO per year) and liberal share recycling provisions.

21.5%27.7%11.7%0.0%5.0%10.0%15.0%20.0%25.0%30.0%Pre-IPOAt-IPOMature CompaniesMedian Equity Overhang

Note: Pre-IPO and At-IPO equity overhang reflects the sample of 20 companies. Equity overhang for mature companies2 reflects sample (n=195) of S&P 1500 companies in the Information Technology sector, excluding companies that have gone public in the past three years.

Employee Stock Purchase Plans (ESPPs)

Many of the technology companies that went public implemented ESPPs in conjunction with their IPOs. ESPPs enable employees to purchase company stock, often at a discount, through payroll deductions. Most ESPPs are designed to be qualified plans under Internal Revenue Code Section 423, and from the standpoint of proxy advisory firms, such as ISS and Glass Lewis, are considered non-controversial. ESPPs are an appealing way for all employees to voluntarily acquire company shares after the IPO event. This is especially important as companies shift from granting equity to all employees to granting equity on a more selective basis (e.g., senior manager and up). An ESPP is an employee benefit that can be structured in ways (such as rollover provisions or extended offering periods) that make it an attractive recruiting and retention tool.

Founder Compensation

Every company has a different growth trajectory in its early years after formation. Founders typically must dilute personal ownership of the company in order to raise necessary capital. Companies in our study typically had multiple founders; however, not all founders contribute in the same way as the company evolves. Founders are often uniquely positioned and are key assets to their companies, which makes their retention crucial especially since finding a suitable replacement may be both difficult and expensive.

Founders who remain in executive roles after IPO have varied compensation packages depending on the specific circumstances. In some cases (Snap and Airbnb) founders reduced their base salaries to $1 post-IPO in exchange for significant equity grants in conjunction with the IPO. This is not typical as most founders maintain cash compensation (base salary and target bonuses) at market competitive levels.

With respect to equity compensation, some companies (including Airbnb and DoorDash) provided significant equity grants at or just prior to IPO. These grants often vest based on the achievement of performance criteria (e.g., stock price or market capitalization goals) and have long vesting periods that correspond with the magnitude of the award. Companies view these additional, often significant, equity grants to founders as necessary to incent continued service and focus, to maintain alignment with stockholder interests, and to mitigate the dilutive effects of public offerings on founder equity stakes.


Despite no “one-size-fits-all” approach to compensation, it is important to understand the various equity compensation tools available for companies preparing for an initial public offering. CAP’s review of recent technology IPOs highlights the latest trends in equity compensation needed to attract and retain skilled talent. Equally important is proactively and frequently communicating the value and mechanics of equity to participants for these awards to have maximum impact. Aligning pay philosophy with company culture and shareholder interests are important guiding principles to consider as companies design their equity incentive practices around IPO.

1 Overhang for IPO companies: Numerator = [Outstanding full value shares & options + shares available for grant + additional share requests] / Denominator = [Numerator + common shares outstanding as per the record date of the S-1 filing]

2 Overhang for Mature Companies: Numerator = [Outstanding full value shares & options + shares available for grant + additional share requests] / Denominator = [Diluted weighted average shares outstanding]

More than six months have passed since the COVID-19 pandemic began. In February, American businesses were hit hard by shutdowns, shifting demand, operational disruptions, and significant new challenges for employee health and safety. Many S&P Composite 1500 companies responded with changes to their compensation programs for executives and employees. Initial pay actions in March, April and May focused on conserving cash, mainly through salary cuts. Over the summer, companies adapted, and pay actions began to focus on annual and long-term incentive plans.

Public filings in September and October offered the first detailed look at how U.S. public companies adjusted their executive compensation plans in response to COVID-19. Public companies with fiscal year ends (FYEs) on or near June 30 recently filed their proxy statements, which included robust discussions of the impact of COVID-19 on 2020 executive compensation decisions and plans for 2021. Of the S&P Composite 1500 companies – which Compensation Advisory Partners (CAP) has been closely tracking – 65 companies with FYEs between May 30 and July 3 filed their annual proxy statements by October 7. Of the 65 companies, 28 – or 43 percent – announced changes to their outstanding and go-forward incentive plans because of COVID-19. Approximately 60 percent of the 28 companies had responded at the start of the pandemic with immediate human capital actions, including temporary reductions to executive base salaries, and adverse broad-based employee actions.

It is too early to say whether actions taken by the June FYE companies are indicative of trends we will see when most companies file their proxy statements in the spring of 2021. From an industry-sector standpoint, the June FYE companies show significant representation from Information Technology (28%), Industrials (15%), and Consumer Staples (15%). While not a completely representative sample, this group of companies still provides an interesting early look at executive compensation responses to COVID-19 beyond annual pay reductions.

The majority of the 28 companies that reported COVID-19-related pay actions adjusted both their annual and long-term incentive plans. About 85 percent of the companies made changes to their annual incentive plans, and 75 percent made changes to long-term incentives. Twenty-two of the companies took more than one incentive action.

Annual Only(n=7)25%Both(n=17)61%Long-term Only(n=4)14%Annual and Long-Term Incentive Actions in Response to COVID-19 (n=28)Number of Incentive Actions per Company2261

Annual Incentives

Of the 28 companies, 24 made changes to their outstanding and/or go-forward annual incentive plans. The most common changes were modifying the performance period, exercising discretion to determine award amounts, revising the payout scale, delaying goal-setting and adding or changing performance metrics.

973111423642139665211Revised Outstanding PlanRevised Go-Forward PlanDeferred PayoutReset GoalsCanceled PlanAdded / Changed Metric(s)Delayed Goal-SettingRevised Payout ScaleAdjusted Performance PeriodAnnual Incentive Plan Changes in Response to COVID-19

Prevalent annual incentive actions are discussed below.

Adjusted Performance Period

Several June FYE companies adjusted the performance period for an outstanding plan. For these companies, COVID-19 only impacted fourth-quarter results, so most of their 2020 fiscal years were business as usual. In go-forward plans, shorter performance periods are intended to focus executives and employees on immediate priorities, and to recognize that goal-setting will be difficult because of COVID-19.


# of Companies

Outstanding Plan

Shortened the performance period to exclude the pandemic.


Go-Forward Plan

Bifurcated annual performance periods.


Set quarterly goals.


Use of Discretion

Eight companies applied discretion to outstanding incentive awards. The disclosed rationale for the use of upward discretion was to recognize the extraordinary efforts of executives and employees who contributed to companies’ COVID-19 responses, and to recognize performance before COVID-19 hit.


# of Companies

Outstanding Plan

Applied discretion to increase annual incentive funding and awards.


Used downward discretion to reflect the negative impact of COVID-19.


Revised Payout Scale

Revisions to payout scales for outstanding awards were made primarily to prorate awards in conjunction with adjusted performance periods, as discussed in “Adjusted Performance Period.” Payout scales were revised in go-forward plans for a number of reasons: to widen the performance curve to reflect the difficulty with goal-setting, to reduce maximum payouts for cost containment, and to implement a payout floor and increase the award maximums to incentivize superior performance.


# of Companies

Outstanding Plan

Revised payout scales in conjunction with shortening performance periods to remove the impact of COVID-19. The payouts were prorated based on how much the performance periods were shortened.


Go-Forward Plan

Widened performance curves.


Reduced maximum annual incentive award to be 150 percent of target, down from 200 percent of target.


Added a payout floor, increased maximum payout, and adjusted corporate and business unit award multipliers.


Delayed Goal-Setting

Six companies delayed goal-setting for go-forward plans. The rationale is to allow time for more information to predict financial performance.


# of Companies

Go-Forward Plan

Delayed goal-setting in conjunction with breaking performance periods into smaller units.


Delayed goal-setting to have more accurate information for forecasting.


Added/Changed Metrics

Several June FYE companies changed performance metrics for their annual incentive plans to move away from financial measures. The shift to operational measures illustrates that companies are opting to focus executives and employees on drivers of financial performance, which may provide clearer line of sight or may be easier to forecast in unpredictable times. Similarly, the shift to strategic and individual metrics may allow for more discretion in payout determination and recognizes the importance of non-financial goals at this time.


# of Companies

Outstanding Plan

Changed metrics for outstanding awards to focus on near-term priorities, and company health and well-being.


Go-Forward Plan

Adjusted annual performance metrics, including shifting to operational, strategic, and individual performance.


Long-Term Incentives

Of the 28 companies, 21 made changes to their outstanding and/or go-forward long-term incentive plans. All but four of the companies that adjusted long-term incentives also adjusted annual incentive plans. The most common changes were modifying the performance period, revising the payout scale, changing the long-term incentive vehicle mix, changing metrics for performance awards, and delaying goal-setting.

76W55105512111055Delayed Goal-SettingChanged Performance MetricsChanged LTI Vehicles Revised Payout ScaleAdjusted Performance PeriodRevised Outstanding PlanRevised Go-Forward PlanLong-Term Incentive (LTI) Plan Changes in Response to COVID-19

Modified the Performance Period

As with annual incentive plans, modifying the performance period was the most prevalent long-term incentive plan change. CAP predicts goal-setting will remain as a key challenge for incentive plan design for 2021 and beyond. The COVID-19 pandemic hurt many companies and helped others (e.g., consumer staples), resulting in highly unusual results for 2020. To address future uncertainty during goal-setting, breaking performance periods into smaller periods may become more common until economic conditions stabilize.


# of Companies

Outstanding Plan

Modified the performance period for outstanding awards, including omitting the quarter negatively impacted by COVID-19. With that change, some companies also prorated the award amounts commensurately.


Go-Forward Plan

Divided the award period into shorter periods for purposes of goal-setting and award calculation.


Shortened the three-year performance period to two years.


Changed the goal-setting approach to include a cumulative goal.


Revised the Payout Scale

Revisions to past payout opportunities and maximums were made to prorate awards in conjunction with shortened performance periods, or to cap the payout and conserve cash.


# of Companies

Outstanding Plan

Decreased the payout scale for outstanding awards in conjunction with omitting quarters negatively impacted by COVID-19. Prorated the awards commensurately (e.g., if performance were measured over 11 quarters instead of 12, the award would be prorated by 11/12).


Revised award payouts to the maximum based on performance in quarters not negatively impacted by COVID-19.


Capped the maximum payout at target.


Go-Forward Plan

Awarded grants at target regardless of performance.


Increased maximum payout.


Changed Long-Term Incentive Vehicles

Ten companies adjusted the long-term incentive mix for upcoming awards. The most common change was to add time-vested vehicles or to increase the percentage of time-vested vehicles overall to increase retention and recognize the difficulties of goal-setting during the pandemic.


# of Companies

Go-Forward Plan

Added time-vesting vehicles or increased the percentage of time-vested vehicles in the overall mix.


Added stock options to the 2021 fiscal year grant.


Eliminated stock options.


Not granting equity.


Note: Two companies took multiple actions.

Changed Performance Plan Metrics

Given the impact of COVID-19 on U.S. companies, changing performance measures to reflect new business realities has not been a surprising development. Five companies with June FYEs adjusted their long-term performance measures. CAP expects to see more changes in performance measures in go-forward performance plans as companies file proxy statements.


# of Companies

Go-Forward Plan

Adopted relative performance measures, which mitigate the risk of goals being missed because of market events beyond management’s control.


Added strategic metrics to focus management on COVID-related priorities.


Eliminated a more complicated return measure to focus on revenue and profitability.


Delayed Goal-Setting

Five companies delayed goal-setting for future awards. Delaying annual grants or choosing to set targets in the second quarter could provide companies with flexibility to set more accurate and realistic performance goals.


# of Companies

Go-Forward Plan

Made annual grants but delaying goal-setting under the grants until there is more predictability surrounding COVID-19 and its impact.


Delayed making annual grants.


Special Awards

Four companies with June FYEs provided special awards to executives. FedEx and Nike made special awards to replace annual and long-term incentive awards that were not paid because of COVID-19. Tapestry and Herman Miller provided special grants to incentivize executive performance. CAP expects to see more special awards in the future.


Revenue ($M)


Grant Date

Award Value ($000s)

Award Type*


FedEx Corporation






Ratable 4-year



NIKE, Inc.







Other NEOs

$2,533 (avg.)

Tapestry, Inc.


All NEOs


$200 – $500


Cliff 2-year

Herman Miller


Leadership, including NEOs


Not disclosed

Premium SOs

Ratable 3-year

* SOs are stock options; PSUs are performance share units.

Looking Ahead

CAP expects companies to make increasingly more changes to their executive compensation programs to address the impact of COVID-19, market volatility and the challenges of credible long-term forecasting.

Annual Incentive Plans

  • Use of informed or structured discretion to determine payouts.
  • New or increased weighting on operational, strategic, and individual performance metrics. These may be incorporated as environmental, social and governance (ESG) metrics, which provide a more holistic view of business performance and consider different stakeholders.
  • Use of wider performance scales around target goals, which may lead to less volatility in payouts.
  • Delay of goal-setting to improve accuracy.
  • Use of shorter performance periods to address goal-setting difficulties.

Long-Term Incentive Plans

  • Increased use of time-based restricted stock/units for retention. CAP still expects at least 50% of long-term incentives to be performance-based, given the long-standing expectations of proxy advisors and major investors.
    • Companies may exclude the chief executive officer or named executive officers from the shift to time-based equity.
  • Use of relative performance measures (primarily total shareholder return), or an increase in the weight of relative measures.
  • Delay of goal-setting to improve accuracy.
  • Use of shorter periods for performance-based long-term incentives to lower the risk of the overall incentive program.

Bertha Masuda and Bonnie Schindler discussing the use of ESG metrics in private companies.

Compensation Advisory Partners (CAP) assessed human capital actions taken by companies in the Consumer Staples sector in response to the COVID-19 pandemic. Key findings include:

  • The Consumer Staples sector was moderately impacted by the COVID-19 pandemic, with 36% of companies in the S&P 1500 taking human capital actions.
  • Food and Staples Retailing companies reported the most actions – many of which were positive for employees: expanded paid time off and health care benefits, one-time bonuses and additional pay for on-site workers, and workforce expansions
  • The five most prevalent human capital actions by the Consumer Staples sector are additional payments for on-site employees (non-executives), expanded benefits programs, one-time bonuses for non-executives, furloughs of employees, and workforce expansions.
  • Only a handful of companies in the sector reported executive salary reductions:
    • Median salary reductions were 28% for CEOs and 25% for other executives.
    • For boards of directors, pay was cut by a median of 50%.

The PDF of the report provides additional data for the Consumer Staples sector.
The human capital actions that CAP is tracking include pay cuts; changes to annual and long-term incentives; furloughs; workforce reductions; suspended 401K matches; enhanced health and welfare benefits; additional pay for frontline workers; pay continuity; and workforce expansions. CAP will continue to monitor corporate public announcements of COVID-19 actions.