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Associations Now

What Do Association CEOs Earn?

ASSOCIATIONS NOW, July 2008, Feature

By: Shawn E. Six

ASAE & The Center’s new compensation and benefits report will be out this month. Here’s what it shows for CEOs.
Summary: Some highlights from ASAE & The Center's new compensation and benefits report reveals current trends in compensation for the number-one spot at associations.
While there are many factors that affect CEO total compensation, a few factors have proven to have a direct relationship to CEO compensation based on ASAE & The Center’s newly updated Association Compensation & Benefits Study and previous studies. There are four such organizational factors—annual budget, staff size, geographic location of organization, and membership type—and one key personal factor—gender. Other variables that may be important to consider, including experience and skills, are not so easily measured. This examination is not meant to be exhaustive; rather, the analysis that follows is intended to explore the relationship between CEO total compensation and specific organizational and personal factors.

Some of the factors associated with CEO compensation are difficult, if not impossible, to measure. The environment at each individual organization is unique, as is the set of experiences and qualifications that each individual CEO possesses. The strongest factors in determining CEO compensation are likely the specific ranking factors sought by a search committee, which undoubtedly differ from one organization to the next. Therefore, the following should be used only as guidelines for determining CEO remuneration.

Total Compensation and Annual Budget

Historically, data presented in our compensation and benefits studies have indicated that the annual budget is the most important factor to consider when examining the total compensation of CEOs. This year is no exception: Once again a strong positive relationship exists between the total compensation received by a CEO and the size of his or her organization’s annual budget. The larger the annual budget, the greater the CEO’s total compensation. In fact, the median total compensation of CEOs working at organizations with budgets of more than $25 million (this study’s largest budget category) is $435,700, which is nearly seven times greater than the $62,750 median total compensation of CEOs employed in organizations with budgets of $300,000 or less (this study’s smallest budget category).

Median Total Compensation, by Organizational Budget

$300,000 or less:

$62,750

$300,001 to $500,000:

$84,100

$500,001 to $750,000:

$94,775

$750,001 to $1,000,000:

$115,094

$1,000,001 to $2,500,000:

$141,500

$2,500,001 to $5,000,000:

$190,657

$5,000,001 to $10,000,000:

$258,500

$10,000,001 to $15,000,000:

$317,312

$15,000,001 to $25,000,000:

$330,692

More than $25,000,000:

$435,700

Total Compensation and Staff Size

Number of staff is another factor that has a direct correlation to CEO compensation. In general, the larger an organization’s staff, the greater the CEO’s earnings. Thus, staff size and annual budget are largely interchangeable factors to consider when examining CEO total compensation. However, total annual budget has historically maintained a stronger relationship to the compensation paid to CEOs. In this study, CEOs working in organizations with two or fewer employees earned a median total compensation of $75,600, while CEOs at organizations with more than 100 employees earned $394,950. In comparison, in 2006 CEO compensation in associations of those sizes was $68,000 and $362,440, respectively.

Total Compensation and Geographic Location

The geographic location of an organization—and more specifically, the cost of living in that location—is important to consider when examining the compensation received by the CEO. In general, the higher the cost of living of a particular area, the higher a CEO’s total compensation. Cost of living indexes and salary conversion calculators offer information about the comparability of the cost of living and salaries from one metropolitan area to another. There are many such tools currently available online (e.g., the ACCRA Cost of Living Index at www.coli.org).

Metropolitan Area Responses Median Total Compensation
Washington, DC 198 $253,950
Chicago, IL 64 $235,505
New York, NY 13 $190,000
Los Angeles, CA 16 $174,750
Columbus, OH 15 $166,400
(Note: Other factors, such as association size, will have a stronger correlation to CEO compensation than a city’s relative cost of living will.)

Total Compensation and Membership Type

Historically, membership type has also been strongly correlated to CEO total compensation. These results are consistent with the patterns established in earlier studies. Overall, trade association CEOs earn more than their counterparts at individual membership organizations (IMOs).

Budget Trade Associations IMOs
$300,000 or less $73,830 $60,000
$300,001 to $500,000 $91,400 $80,000
$500,001 to $750,000 $101,674 $89,050
$750,001 to $1,000,000 $130,825 $102,167
$1,000,001 to $2,500,000 $154,500 $123,408
$2,500,001 to $5,000,000 $207,400 $174,487
$5,000,001 to $10,000,000 $279,447 $240,491
$10,000,001 to $15,000,000 $397,136 $257,400
$15,000,001 to $25,000,000 $393,350 $280,944
More than $25,000,000 $444,195 $443,350

Employment Terms

Two thirds of the responding organizations have a written contract or arrangement with their CEO. The average length of the contract is three years. Most of the written contracts (80 percent) have a clause allowing for termination before the specified number of years. More than half (54 percent) of the contracts have a severance clause in the contract, with typical severance allowing for salary to be paid for six to nine months. Few organizations (23 percent) require the CEO to sign noncompete agreements; however, the percentage increases with the size of the organization.

In addition, three quarters of the responding organizations guarantee a formal performance review for their CEO. Performance reviews are almost always done on an annual basis. This review is typically administered by either the executive committee (52 percent) or a performance review committee of the board of directors (25 percent).

CEO Benefits Total
Responses 987
Bonus 64%
Local transportation subsidy 14%
Car leasing 17%
Car ownership 19%
Spouse’s/domestic partner’s travel expenses 21%
Cellular phone/pager purchase 64%
Handheld device (e.g., Palm Pilot, Blackberry,etc.) purchase 56%
Home computer purchase or lease 15%
Membership to a Country/residential club 10%
Membership to an In-town club 10%
Professional membership dues 72%

Total Compensation and Gender

Consistent with all previous studies, female CEOs generally earn less than their male counterparts in all budget size categories.

CEO gender strongly correlates with CEO total compensation within each of the nine budget categories. In addition, the ratio of female CEOs to male CEOs decreases as annual budget size of the organization increases. In the smallest organizations (those with annual budgets of $300,000 or less), women make up more than two thirds of the CEOs, while in the largest organizations (those with annual budgets of more than $25 million), women make up only one fifth of the CEOs.

Budget Male Median Female Median
$300,000 or less $74,160 $60,250
$300,001 to $500,000 $95,130 $80,500
$500,001 to $750,000 $108,150 $87,130
$750,001 to $1,000,000 $125,687 $108,000
$1,000,001 to $2,500,000 $151,493 $123,800
$2,500,001 to $5,000,000 $194,375 $170,000
$5,000,001 to $10,000,000 $260,559 $235,324
$10,000,001 to $15,000,000 $347,120 $260,887
$15,000,001 to $25,000,000 $354,456 $285,000
More than $25,000,000 $465,900 $384,437

Shawn E. Six is principal of Industry Insights, Inc., the firm contracted by ASAE & The Center for Association Leadership to conduct the research for The Association Compensation & Benefits Study, 2008-09 edition. The material in this article was adapted from the executive summary of the full report. The report is available through ASAE & The Center for $195 for members, $315 for nonmembers. Compensation data for the 78 association positions that were part of the study may also be purchased online.

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