Chief Financial Officers (CFOs) of public American companies bear immense responsibility for the stability of their business. Their charge is the financial health of the organization; they manage at a high level how resources are allocated and how finances are recorded and reported. In good times, CFOs optimize the financial resources of their company. In turbulent times like those we are living through now, they are an essential operator in getting the organization to the other side of the crisis. Such is their importance that the SEC mandates disclosure of their compensation, just as it does with the more visible CEO. The accessibility of this data allows for a comprehensive view of the compensation landscape of the CFOs in the Equilar 500, a revenue index of the largest companies in the United States.
In turbulent times ... [CFOs] are an essential operator in getting the organization to the other side of the crisis.
Over the last 10 years, CFO total compensation has generally trended upwards. The spread between the tracked percentiles has remained fairly constant. A CFO receiving exactly the median total compensation would have received $1.4 million less than a CFO at the 75th percentile in 2011 and $1.6 million less in 2020, while making $900,000 more than a CFO in the 25th percentile in 2011 and $1.1 million more in 2020. This is excellent news for CFOs in lower percentiles, since their compensation has increased at a faster rate than those in higher brackets, but it also indicates that pay for this position is pretty stable across the board. The highest-paid CFOs are not seeing runaway compensation increases relative to the rest.
The smooth upward trend of CFO compensation taken as a whole disguised some turbulence in industry sectors. While compensation did end the decade higher than it began for all sectors, not all saw the gentle curve of the median CFO in the utilities sector. The technology, healthcare, communications and especially the real estate sectors saw more volatility in the year-to-year total compensation afforded to their CFOs. CFOs in the real estate sector in particular experienced cycles of sharp compensation growth followed by gradual yearly declines, with the most dramatic spike being the $1.7 million increase from 2012 to 2013.
The compensation vehicles for CFOs have followed stable trends over the last decade. Salary has consistently been 14%–15% of the total compensation package. Bonus payments declined slightly in the last three years, but did not exceed 6.3% throughout the 10-year period. The vehicles that have seen the most change are stock and options. Stock has been increasing steadily, going from just over a third of total compensation in 2011 to 46.8% in 2020. Options have been declining at a similar rate from 19.2% in 2011 to 12.3% in 2020. A portion of the gains to stock also came from the relatively minor decline in non-equity awards.
To further illustrate that the gains in stock are not just at the expense of options, the median compensation in the form of equity trended upwards. The amount of equity as a percentage of total compensation value peaked in 2019 at 59.9%, up 6.2 percentage points from 2011. Equity, which derives its value entirely from a company’s market performance, has comprised more than 59% of total compensation for the last three years in accordance with the push to correlate compensation directly with performance.
Women have seen increased representation among Equilar 500 CFOs over the last 10 years.
Women have seen increased representation among Equilar 500 CFOs over the last 10 years. The percentage declined for the first time in 2020, but there has been an overall trend towards more female CFOs, with representation up 46% since 2011.
While there may be fewer female CFOs, their median compensation has been comparable to, and in recent years has even exceeded, that of their male peers. The median compensation for male CFOs represents a much larger number of individuals dispersed over a comparatively larger spectrum of companies and industries, and so the curve of the median male CFO is smoother than that of the median female CFO which has had a dynamic decade. There was a 68% increase in total compensation for women from 2011 to 2020, while there was only a 37% increase for male CFOs over the same period. Women saw their median compensation fluctuate for six years before it began to increase steadily and outperformed men’s for the first time in 2017.
CFO pay trends have been towards higher overall compensation and greater percentages of equity. Some sectors have been volatile, but still follow the overall trend of increased pay. While women are still relatively rare in this role, those who have achieved the title have seen larger median compensation packages than the CFOs of the Equilar 500 at large. A stable, capable CFO has proven to be an asset, and those who meet the standard have been compensated accordingly.
Nathan Grantz is Senior Research Analyst at Equilar.