Construction Leaders See Drop in Pay
Despite the “bright future” of the construction and engineering industry, those at the helm are making less money, a new report says.
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 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 (stock, options, etc.).
Declines Due to Performance
Long-term compensation 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.
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.
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.
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.
Executives at the Top
Meanwhile, significant increases in total compensation have gone to heads of executive project controls; contracts; public relations; equipment operations; and project management.
For example, contract heads saw a 58.8 percent increase in total compensation during the report period; public relations heads, 56.7 percent.
FMI indentified the top five gainers in pay. Those include contracts and public relations heads.
“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.
Drops in Bonus Pay
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.
|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.
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).
Based in Raleigh, NC, FMI is a global engineering and construction consultancy. The firm publishes an annual series of compensation surveys.
Contract heads, in particular, show a significant increase in bonuses over five years. 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.