COMPARING EXECUTIVE COMPENSATION IN INTERNATIONAL MARKETS
An oilfield services company, based in the U.S., was acquiring a Canadian company in the same industry niche. Like many other companies, the U.S. company was driving growth through acquisitions. Although it was not the client’s only acquisition within this timeframe, this one was so large that it changed the company’s composition. There were concerns about integrating the two companies and retaining executives in both.
Because there were executives in both countries, the client wanted to ensure that compensation was fair and competitive for executives no matter where they were located.
Pursuing this objective played out against a background of massive change: The client company was taking on a new international role, it was working to integrate its acquisition operationally, and it was transitioning from a U.S. stock exchange to a Canadian stock exchange. Because Canadian compensation is very different than U.S. compensation, especially for stock awards, the company wanted to be aware of compensation trends in both markets.
The client’s CEO was moving from the U.S. to Canada, so the stakes were even higher. The company did not want to overpay the CEO, but it needed to attract him with enough compensation to make the transition.
The company’s goals:
Ensure that executives in both the U.S. and Canada were compensated fairly and competitively for the country in which they were located
The company’s goals:
- Support the integration of the new acquisition
- Ensure that executives in both the U.S. and Canada were compensated fairly and competitively for the country in which they were located
Frost HR Consulting was contracted to complete a compensation assessment for executives in both the client company and its acquired company. In addition, the firm was asked to determine the differences between U.S. and Canadian results and whether or not the company was market competitive in either or both countries.
Frost HR Consulting’s primary goals:
- Assess the compensation of executives located in the U.S. against the U.S. market
- Assess the compensation of executives located in Canada against the Canadian market
- Compare the company’s executive compensation in both countries to one another
The project followed a step-by-step process:
- Consultants collected information about both the client and its new acquisition, researching both to determine critical factors such as revenue and performance before the acquisition and projected revenue after the acquisition.
- Consultants identified peer group companies in the marketplace appropriate for benchmark studies. Two sets of peer companies were selected—one set of U.S.-traded companies and a second set of Canadian-traded companies. Requirements included companies with operations in both countries; companies engaged in the same oil drilling niche; and companies growing quickly because of acquisitions.
- Consultants compared compensation elements for every executive against executives in peer group companies in both countries to gather data about how country markets were different for each position.
- Consultants reported comparison data and made recommendations to the company about compensation modifications that would ensure parity between countries and competitiveness within markets.
- Consultants assisted in writing a portion of the client’s proxy statement—the compensation discussion and analysis. Assistance included improving the section’s readability—removing legalese and jargon, and rewriting the text in clear, straightforward English—and adding more graphs and tables for enhanced understanding.
Implementing recommendations made by Frost HR Consulting, the client successfully integrated the acquired company, and with competitive compensation, retained valued executives in both companies. Revenue grew from $108 million to $171 million, with the acquisition accounting for $12.3 million. (Amounts are shown in U.S. dollars.)
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