by Kelly Malafis and Devika Ray, Compensation Advisory Partners for Boardmember, June 2011.
Several years ago, pay levels for Chief Financial Officers (CFOs) were increasing at a faster rate than other C-suite executives, including the Chief Executive Officer (CEO). This more dramatic increase was partially explained by the evolving role of the CFO. While always an integral member of senior management, the role of the CFO has become an increasingly important position at major companies with extra demands given the volatility in the economic environment, investor expectations and scrutiny. Additionally, CFOs were intimately involved in dealing with the impact of the financial crisis, resulting in a greater oversight role and
interaction with the Board of Directors.
To determine if this trend is continuing, Compensation Advisory Partners conducted a study to determine how CFO pay has changed over the last three years and how the year-over-year trends in compensation compare to trends in CEO pay. The study analyzes executive pay data disclosed by early proxy filers and includes 55 US public companies with revenues ranging from $1 billion to $150 billion, with median revenues of $10 billion. Only companies with the same incumbent CEO and CFO from 2008 to 2010 were included in order to focus on year-over-year changes for an individual. Financial services firms were excluded from
the study as this industry, in particular, saw the emergence of several atypical compensation arrangements and special awards that were both temporary and unique to the financial services industry.
Our findings indicate that CFO pay is generally moving at the same rate as CEO pay. Salaries are increasing at a slightly faster rate for CFOs but incentive compensation, both annual and longterm, is moving at the same rate for CFOs and CEOs, illustrating that incentive levels are tied to company results. For 2010, incentives are up for both CFOs and CEOs, reflective of a slowly rebounding economy.
Continue reading Early Pay Trends: Spotlight on Chief Financial Officers.