Annual Survey for the CEO's of the Council of Manufacturing Associations. If you are a member and would like to get a copy of 2012's, please contact us and we will be happy to send it to you.

1. Current Developments in Association Compensation
National Association of Manufacturers Council of Manufacturing Associations
June 7, 2011
Charles W. Quatt, Ph.D.
President
Quatt Associates, Inc.
2233 Wisconsin Avenue, NW
Suite 501
Washington, DC 20007
(202) 342 1000 x. 103
cquatt@quatt.com

2. 2
Discussion Topics
 National Association of Manufacturers Council of Manufacturing Associations Survey Trends
 Approaches to Market Pricing: Defining the Marketplace
 Using Survey Data
 Current Trends in Executive Compensation
 Governance Trends

3. 3
NAM CMA Survey Trends
 Participation has risen by 50% since the survey’s inception in 2009.
Number of Participants 2009-2011
2009 54
2010 69
2011 81
 Survey median budgets have decreased since 2009.
Median Budgets Among All Participants
2009-2011
2009 $4,800,000
2010 $4,500,000
2011 $3,307,594
 Organizations that participated in all three years: budgets dip in 2010.
Median Budgets Among Common
Participants 2009-2011
2009 $4,207,000
2010 $3,550,000
2011 $4,197,000

4. 4
NAM Survey Trends among Three Year Survey Participants
Change in Total Cash Compensation 2009-2011
(Common Participants)
Respondents Change/ 2009 Respondents Change/ 2010 Respondents Change/ 2009
2009 to 2010 2010 to 2011 2011 to 2011
Highest Paid 26 -2.10% 26 8.70% 25 6.41%
Second Highest Paid 25 6.80% 24 6.88% 24 14.15%
Third Highest Paid 24 5.98% 21 0.00% 22 5.98%
Fourth Highest Paid 23 15.53% 19 -11.26% 21 2.52%
Top Finance and Administration 20 3.05% 20 3.69% 20 6.84%
Top Government Relations 11 0.82% 11 5.28% 11 6.41%

5. 5
NAM Survey Trends
Change in Total Cash Compensation 2009-2011
(All Participants by Budgetary Category)
Less than $2.5 Million $2.5 to $7.5 Million Greater than $7.5 Million
2009-2010 2010-2011 2009-2011 2009-2010 2010-2011 2009-2011 2009-2010 2010-2011 2009-2011
Change Change Change Change Change Change Change Change Change
Highest Paid 9.7% 10.4% 20.1% -5.1% 15.9% 10.8% 4.3% 6.7% 11.1%
Second Highest Paid 6.2% -12.4% -6.2% 15.1% -1.1% 14.0% 13.7% 0.4% 14.1%
Third Highest Paid 13.9% -13.3% 0.6% 18.3% 0.3% 18.6% -0.4% 15.3% 14.9%
Fourth Highest Paid 9.0% -14.1% -5.1% 18.6% -6.8% 11.8% 7.9% 13.7% 21.6%
Chief Executive Officer 9.3% 10.6% 19.9% -5.1% 20.1% 15.0% 4.3% 1.9% 6.2%
Number Two Executive Position -12.3% 6.6% -5.7% -1.6% -3.8% -5.4% 8.8% -2.9% 5.9%
Top Finance and Administration 14.1% -20.7% -6.6% 9.7% -5.5% 4.2% 2.8% 7.3% 10.0%
Top Government Relations Position 12.0% -26.5% -14.5% -12.4% 6.5% -5.8% 20.4% 6.2% 26.6%

6. 6
NAM Survey Trends
Incentive Compensation Awards as Percentage of Base Salary 2009-2011
(All Participants and by Budgetary Category)
All Participants Less than $2.5 M $2.5 to $7.5 M Greater than $7.5 M
2009 2010 2011 2009 2010 2011 2009 2010 2011 2009 2010 2011
Chief Executive Officer
Q1 7.0% 12.0% 7.9% 4.7% 8.7% 5.6% 5.7% 11.9% 8.6% 15.3% 10.2% 15.5%
Median 14.0% 19.9% 14.2% 8.2% 15.6% 10.3% 10.8% 20.2% 12.7% 20.7% 14.1% 17.1%
Q3 20.4% 22.5% 20.1% 17.4% 24.2% 17.9% 16.4% 22.6% 25.6% 30.0% 22.1% 26.4%
Executives
Q1 4.2% 4.3% 4.5% 4.6% 1.8% 2.1% 3.7% 4.2% 4.1% 6.2% 8.5% 5.1%
Median 6.5% 8.1% 6.7% 6.1% 3.3% 4.2% 5.1% 6.7% 5.9% 12.0% 11.0% 7.9%
Q3 12.9% 13.5% 8.6% 9.7% 6.3% 7.8% 6.5% 11.3% 8.3% 18.7% 15.0% 17.7%

7. 7
NAM Survey Trends – Incentive Compensation Practices
Percentage Awarding Incentive Compensation 2009-2011
(All Participants by Budgetary Category)
Greater than $7.5
Less than $2.5 Million $2.5 to $7.5 Million
Million
2009 2010 2011 2009 2010 2011 2009 2010 2011
Chief Executive Officer 66.7% 43.5% 66.7% 73.3% 66.7% 65.2% 81.3% 85.7% 87.5%
Overall (All Positions) 58.4% 38.5% 60.3% 47.5% 62.4% 61.4% 76.7% 72.2% 81.5%

8. 8
Approaches to Market Pricing: Defining the Marketplace
 Defining the peer group of market comparators is the most crucial step in market pricing. There
is increasing scrutiny of the peer group by Board members, the public, and other stakeholders.
 Factors in developing an accurate and defensible comparator peer group:
 Organizations with similar
 Mission
 Location
 Scope
 Budget
 Staff size
 Impact
 Similar talent pool for executive attraction/retention
 Specific characteristics of the executive
 Work history, professional background, other (e.g., political background)
 Education and experience requirements
 Time in position

9. 9
Using Survey Data
 Review the database, ensuring sufficient number of data points
 Make sure position matches are appropriate
 Be able to defend survey choices
 Understand use of base salary versus total cash compensation in selecting survey data
 When setting compensation levels for the CEO and other senior positions, consider:
 Compensation philosophy
 Organization financial status and affordability of executive compensation
 Internal pay practices among executives and staff
 Board opinion

10. 10
Trends – Base Salary
 2010 vs. 2011 Projected Salary Increase Comparison:
Results of Quatt Associates Surveys1
2011 Projected Data 2010 Projected Data
(Obtained in October 2010) (Obtained in October 2009)
Chief Executive Total Salary Increase2 3.0% 2.1%
Executive Total Salary Increase2 3.0% 2.1%
Staff Total Salary Increase2 3.0% 2.3%
Percentage of Organizations Holding 8.8% 36.4%
Salaries Flat
1
Data are salary increases measured as a percentage of budget, not as a percentage of incumbent salary.
2
Results include organizations reporting holding salaries flat.

11. 11
Trends – Annual Incentive
 Continued and growing use of incentive compensation plans. Focus on ensuring:
 Goals are defined relative to mission and strategy.
 Incentive levels are supported by meeting financial goals
 Plan is driving the right types of results and leadership behaviors
 Incentive payouts (individually and in total) correspond to the level of performance achieved
 More organizations are using formal, objective-based, formula-driven plans rather than using
discretion in determining awards
 The best formula-driven plans have formal plan documents and define:
 Formal tie between performance goals and the compensation plan
 Measurements for success – both an institutional “scorecard” and a leadership assessment
score
 Award levels: threshold, target and maximum

12. 12
Trends – Long Term and Retention Incentive Plans
 The prevalence of long-term incentive plans (LTIPs) has been increasing in the last few years,
 LTIP’s are often structured in 457(f) plans.
 The main objectives of LTIPs are to reward long-term performance and promote executive
retention
 Award amounts are usually much lower than in for-profits, where they can generate a significant
portion of an executive’s pay package

13. 13
Trends: Governance
 Increased level and demands of governance related to executive compensation and performance
assessment due to:
 Increased availability of compensation information through the new 990 reporting requirement
 Significantly greater scrutiny of compensation data by the public, stakeholders, the press,
government and internal staff
 Board Committees, not individual Board Chair, making decisions
 Greater engagement of full Board
 New 990’s are asking if all Board members have received the 990.
 Greater practice in documenting compensation philosophy, system, annual performance and
decision processes
 Documented defensibility

14. 14
Board Compensation Decision Making Factors
 Factors for determining appropriate executive compensation
 Market value of the position
 Pay trends in the sector in which board members and stakeholders operate
 Compensation trends among peer organizations and in the geographical area
 Contract terms and compliance with the established compensation philosophy and
compensation system, including the pay for performance system
 The performance of the organization, including its financial performance
 Staff compensation practice, for example the differential between executive compensation
and staff compensation
 Perceived fairness on the part of observers, including:
 The board members
 The stakeholders
 The public