CFO Compensation, Turnover on the Rise
Despite economic woes, CFOs are enjoying a notable rise in compensation, with the increases to their pay packages outpacing those of other C-level executives, according to CFO.com. One reason for the jump: greater accountability. The report states that, “From the passage of Sarbanes-Oxley through the subprime meltdown and into what feels like a perpetually looming recession, CFOs have had to shoulder tremendous responsibility for maintaining the integrity of corporate financials even as they look for ways to improve them.” In short, CFOs have a tough job…and that may be one reason why CFO turnover is also rising.
Executive search firm, A.E. Feldman, reports increased demand for CFOs who can manage a balance sheet and get funding for growth opportunities, CFOs who know the debt markets and Chief Financial Execs who are strong on valuing assets. Flexibility and the ability to adapt to the dynamics of the market as the crisis unfolds are also critical. In short, capital markets experience is weighing more heavily in CFO recruiting.
CFOs on the Frontlines
Today, CFOs are front and center. According to one veteran CFO, “It’s imperative to be ‘battle tested’ with regard to capital markets experience.” Why? Because lenders (be they banks, institutional investors or bondholders) currently “want their money back” so that they can re-price it. Money was too cheap for several years, and now there is a rush to change the terms. CFOs need to be nimble and skilled enough to side-step the capital markets “call,” in any way they can (avoiding defaults, selling non-core assets, tightening working capital, etc.) Otherwise, they will inadvertently transfer value to lenders from shareholders.
Looking ahead, CFO.com argues few experts see CFOs stepping out of the public eye any time soon, which should bode well for future pay prospects. The report quotes Alexander Cwirko-Godycki, Research Manager for Equilar Inc, as saying, “More visibility leads to a ratcheting up of pay.”
CFO Salaries on the Rise
Total compensation for CFOs is rising, according to CFO.com, citing the 2007 Mercer Compensation Survey. The report published this month, states that median total direct compensation for CFOs increased 5.4% to $2.3 million, while that of CEOs declined 1.4% percent, to $7.3 million, and COOs dropped by 1.7% to $3 million. CFOs also achieved the steepest rise in actual short-term incentives, with an average gain of 11.5% to $558,000. In contrast, CEOs saw a decline of 3.5% to $1.5 million. Meanwhile, COOs held steady at $725,000. In addition, base salaries rose 3.1% for CFOs, to $516,000, while CEO base pay was unchanged and COOs saw only an incremental gain of 0.6% to $635,000.
Company size is, of course, a major determinant in overall compensation, notes CFO.com. The Mercer survey also shows that at the 50 largest companies in the United States, CFOs pocketed a median $4.5 million in total direct compensation, and the median base salary for CFOs at Top 50 companies was $614,000.
CFO Turnover Huge
Rising CFO turnover is also accompanying rising pay levels, according to CFO.com, citing Mercer research. Mercer found that CFO departures, jumped to 17% last year – up from just 11% the year before. Translation: more than 25% of companies hired a new CFO last year, sometimes more than once.
Looking ahead, greater CFO accountability will likely continue along with higher turnover. Amid the credit crunch, economy uncertainty and the slowdown in consumer spending, experts contend high turnover in the C-suite is likely to persist.
As the financial crisis continues to unfold, A.E. Feldman is on top of global trends in finance. If you want to grow your career or your company’s bottom line, contact A.E. Feldman’s President, Mitch Feldman now. Find out more about CFO and Risk Management jobs today!
