Proxy Statements and Tax Returns
Form 990 is used by tax-exempt organizations to report their activities to the United States Internal Revenue Service (IRS) and is a required annual filing.
The CFA Institute compensation philosophy is designed to help attract, motivate, and retain top-level executive talent and to reinforce a results-oriented culture through differentiated performance awards that are necessary to deliver sustained high performance to our members and stakeholders.
We apply the same compensation principles for our executives as for the rest of our employees. These principles are as follows:
- Competitive and equitable programs that support the strategic goals of our organization
- Global consistency in the design of our compensation programs while recognizing the need to reflect local practices where necessary
- Balancing the need to attract talent from industry, while simultaneously recognizing the non-profit structure of our business when designing pay practices
- Programs that are consistent, fair, and free from discrimination
How We Make Executive Compensation Decisions
Role of the Compensation Committee
We are committed to having a strong and effective corporate governance framework. A Compensation Committee (CC) of the Board of Governors provides oversight over executive pay. There are four independent governors on this committee that are free of any relationship that would interfere with their exercise of independent judgment. The Committee meets whenever necessary during the course of the year to discuss matters related to executive pay and to provide direction.
We refer to our President and CEO, and to our Managing Directors as “executives." The Compensation Committee determines the compensation of our CEO, including any incentives. In doing so the group may engage independent consultants to provide necessary compensation recommendations. The CC also approves the compensation plan for the organization for implementation by the CEO which includes how much we spend in aggregate on salary increases and incentives on our employees.
Performance is at the forefront of our executive compensation program. As an organization, we value the development of strong goals for our executives. We focus on ensuring that we select the right metrics to measure performance of our executive goals, so we are able to assess and calibrate performance in a meaningful way. Our objective is to recognize the needs of the organization, keeping in mind both financial and strategic priorities while creating value for our members. The CC approves CEO goals prior to the start of the fiscal year. At the end of the year, the CC considers other factors as well such as the organization’s overall performance and how much progress we made towards our strategic objectives to determine how much to pay the CEO.
We review and discuss any disclosures regarding our compensation plans, policies, programs, and practices with the CC and also look for guidance on executive employment agreements and severance arrangements.
We are very aware that we need to have the right people, in the right place, at the right time. We review our CEO and other executive succession plans with the CC to ensure we are prepared and have leadership continuity within our organization by recruiting and/or encouraging individual employee growth and development.
Role of the CEO
The CEO makes performance and compensation decisions for executives reporting into him. He looks at each executive’s contribution, individually and collectively as an executive team, to the successful execution of our organization’s strategic goals for the year and also towards our long-term strategy. He also takes into consideration individual experience, individual performance, internal and external pay equity, development and succession status, time in the position, and other individual or organizational circumstances.
At the end of the performance cycle, the CEO reviews his assessment of each executive’s individual performance and his compensation recommendations with the CC before confirming the decisions. Our CEO does not play any role with respect to any matter affecting his own compensation.
In 2016, we made the decision to conduct an independent executive pay study on an annual basis going forward, as opposed to every three years. The last time we looked at executive market pay was in 2014. We have retained McLagan Partners, a global management consulting firm to conduct the 2017 survey. McLagan performs this study on an independent fee basis and our Compensation Committee of the Board provides oversight over this study.
There are a limited number of companies that closely resemble us in size, scope, and nature of business operations. The objective is to acquire a fair and relevant view of pay practices in markets from where we are most likely to recruit our executive talent. As a result, for each executive position the peer group selection differs and could span different industry sectors including not-for-profit firms, investment firms, academia and higher education, and general industry. In order to attract, motivate and retain top-level talent, we look at base salary, total cash, and total direct compensation between the 50th and 75th percentiles of the market benchmarks for our executive positions.
We evaluate the relevancy of benchmarks based on the following:
- Similar size and complexity
- Similar global scale and scope
- Similar talent profile
- Similar mission-driven membership/education focus