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Industry Executives Feel a Pay Pinch

Friday, January 2, 2015

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U.S. construction and engineering may be bouncing back, but one surprising player is not feeling the love: the boss.

Executive pay, defined as total compensation (base salary, bonus and long-term compensation), has dropped eight percent since 2008, according to a new white paper by FMI, a global construction and engineering management consultant.

executive pay
Photos: FMI, unless noted

Executive pay has dropped eight percent since 2008, the report says. The 2010 spike could reflect the impact of the American Recovery and Reinvestment (Stimulus) Act of 2009, which significantly increased construction activity.

Executive Pay Trends” is the latest in FMI's annual series of compensation surveys and covers about 280 positions.

The results contrast with the findings of an October FMI study, Post-Recession Transformations, which found an increase in the pay of professionals in construction and engineering. Professionals’ pay, which includes only base salary, has increased more than 10 percent.

To examine executive pay trends, FMI focused on total compensation, because executives receive a significant portion of their pay in bonuses and long-term compensation such as stock and options.

Performance Stakes

Long-term and total compensation are heavily influenced by profitability and have seen the sharpest declines for executive officers, according to the new report, authored by Mike Rose, Ph.D.

executive pay

Executive officers have seen significant decreases in total compensation as a result of the economic environment and the associated reductions in bonus and long-term compensation.

In the wake of poor corporate performance, the largest double-digit percentage declines in pay have hit chief executive officers; chief operating officers; chief financial officers; chief administrative officers; assistant controllers; and business unit construction engineering executives.

For example, the total pay for business unit construction engineering executives has declined 41.7 percent, while the pay for chief executives has dropped 17.2 percent in the years since 2008.

The news isn’t “all bad,” Rose reports, as “pay appears to be stabilizing” with the continued recovery from the Great Recession.

Show Me the Money

Meanwhile, significant increases in total compensation have gone to heads of executive project controls; contracts; public relations; equipment operations; and project management.

executive pay

FMI indentified the top five gainers in pay. Those include contracts and public relations heads.

For example, contract heads saw a 58.8 percent increase in total compensation during the report period; public relations heads, 56.7 percent.

“An examination of the positions with the greatest base salary gains reflects the importance of cost control through effective contract management, bid procedures, procurement and logistics,” Rose writes.

Public relations and the building of positive images is also “not simply an important objective, but rather an imperative of the highest importance for the industry,” the report notes.

Bonuses Lost...

Financial and business unit executives have seen the steepest declines in bonuses, reflecting the consolidation of executive power into the corporate suite and away from the business unit.

contractors
U.S. Department of Labor

Bigger bonuses for project management heads reflect the importance of the core function of completing projects on time and on budget, the report notes.

Bonuses for business unit construction engineering executives have declined 73 percent, while those for chief financial officers slid 50 percent, according to the report.

...And Found

The largest gains in bonuses reflect an emphasis on cost control, as well as project management.

Contract heads have experienced a 187 percent increase, followed by equipment operations head (62 percent), business unit engineering (47 percent), and project management head (33 percent).

Contract heads, in particular, show a significant increase in bonuses over five years.

Project

Global engineering and construction consultancy FMI publishes an annual series of compensation surveys and just released a U.S. Markets Construction Overview for 2015.

This position plays an important role in cost control and project performance, with companywide responsibility for developing contract requirements and bid procedures based on performance requirements, cost estimates and schedules, according the report.

In addition, project management head increases reflect the importance of the core function of completing projects successfully on time and on budget, the report notes.

   

Tagged categories: Business management; Construction; Economy; Engineers; FMI; Jobs; Market forecasts; North America; Program/Project Management; Trends

Comment from Tom Schwerdt, (1/5/2015, 10:38 AM)

Good. Executive pay had gotten to utterly ridiculous levels.


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