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Benefits January 12, 2024
Executive Benefits Remain Key to Attracting, Retaining Talent
Non-cash benefits for highly paid executives that promote both physical and fiscal health are valuable offerings to attract and retain C-suite teams, a new Goldman Sachs Ayco survey finds.
Reported by Remy Samuels
Companies trying to remain competitive in attracting and retaining top talent are finding that, in addition to offering competitive compensation, non-cash executive benefits are also integral for success, according to Goldman Sachs Ayco.
The newly released Executive Benefits Survey of 224 companies found there has been a “comeback” for benefits stressing health, focus, efficiency reduction of reputational risk and security of key executives—most notably CEOs.
Jonathan Barber, head of compensation and benefits policy research at Goldman Sachs Ayco, explains that the early 2000s were the “heyday” of perquisites for executives because there were fewer disclosures and less need to be accountable to shareholders about executive compensation.
Starting in the mid-2000s, however, Barber says events like proxy reporting of benefits in 2006—requiring companies to let shareholders know about the benefits they offer—as well as the 2008 financial crisis and the enactment of the Dodd-Frank Act of 2010, which included “say-on-pay” rules—non-binding, advisory votes that enables shareholders to express their preference on executive compensation—changed the landscape of executive benefits.
“What we’re seeing now is certain benefits inching more toward [that] early-2000s level,” Barber says. “A lot of [benefits] are pretty consistent, and there are certain benefits that are kind of dropping off the map. [It] really comes down to the company [analyzing] whether offering the benefit is mutually beneficial to both the company and the shareholders.”
For example, the survey found that the most-offered benefits related to physical and fiscal fitness were financial counseling services (offered by 70% of respondents for CEOs and by 73% of respondents for senior executives), as well as physical exams and tax preparation services. The least-offered benefits were executive medical coverage and executive excess liability insurance.
Barber adds that there are certain benefits that are harder to justify to stakeholders—including shareholders—such as providing country club memberships or dues. Benefits that tend to be easier to justify are those that promote health—physical, mental or financial.
“We want our CEOs and our senior executives healthy,” Barber says. “There’s a lot of expense to get these individuals to where they are, and to replace them can be an onerous process. … We want to make sure executives are healthy, so that’s an easy one to justify, [because] … it’s great for the executives [and] great for the shareholders.”
Barber points out that a benefit like a tax preparation service for executives is valuable because the tax environment is “extremely complex,” and there is a lot of audit focus on high-paid executives.
In addition, the survey found that providing cybersecurity protection is a benefit that has nearly doubled since 2021 for CEOs and senior executives, because its importance in protecting against loss has been widely accepted.
Barber says companies have realized in recent years, after major cybersecurity breaches have occurred, that a breach could result in huge costs for the company and its shareholders. CEOs and senior executives tend to manage the most sensitive information, so it is in companies’ best interest to invest in cybersecurity. Barber also notes that because remote work has become much more prevalent since the COVID-19 pandemic, it is important for executives to be protected when working from home or when they are traveling to another location.
A new SEC rule also requires companies to disclose if they have a major cybersecurity breach and to explain what steps they took to prevent the breach from happening.
Barber says SEC enforcement actions tend to target companies that fail to disclose certain information. For example, he says the benefit targeted the most is use of the company jet for non-business purposes.
“There have been some examples out there where companies have not disclosed that use properly … but that hasn’t had an impact on companies offering the benefit,” Barber says. “It goes back to that ‘Can we justify the use of the company jet?’ and the answer is [typically], ‘Yes.’ Despite all the negative press you might see out there, it’s probably one of the easier ones to justify.”
When companies receive security risk assessments, a third party often suggests that executives fly private because there is too much of risk of not doing so, Barber explains.
Barber argues that success with benefit programs often hinges on how well executives understand and maximize the value of what is available, especially when the landscape of offerings “remains static.” Educating executives on these complex packages also takes time but is a necessary part of delivering competitive offerings.
The Goldman survey was conducted from June through August 2023 and represented industries, such as industrial, consumer, financial institutions, natural resources, technology and media, and health care.
