A recent study conducted by Mercer, a global consulting firm, analyzed compensation for CFOs in 159 companies with in S&P’s 500. Futures for CFOs are bright, as salary increased a median 6.7% in 2014, up from 5.6% in 2013. Median pay increased to $624,000 among companies surveyed. All payment elements increased, from short-term incentives (by 8%) to long-term incentives (7.2%). Among the S&P 100, or the top 100 companies on Standard and Poor’s index, the median pay rose to $800,000. These increases in pay bode well for market earnings, said John Cummings, a principal investigator with Mercer. “Bonus payouts for the CFO and other top executives at most organizations were largely based on corporate results…companies and investors are paying significant attention to ensuring payouts are aligned with corporate performance levels that boost share prices.”
The gap between CFO and CEO pay is also decreasing, according to the study. As a percentage of median CEO pay, CFO compensation rose to 35% in 2014. This is an increase from 32% in 2013.
Accounting for the Pay Increase
The reasons for this are two-fold. On the one hand, “the chief impetus may be pressure on the CFO position due to increased regulatory requirements and focus on financial risk,” said Ted Jarvis, global director of executive compensation data, research, and publications and Mercer. However, the shrinking gap may also signal an elevation in a CFO’s status. The position is being viewed as a strategic one. “If a CEO doesn’t seek the CFO’s strategic view, the CEO could be missing a key ingredient that could impact meeting the objective. Both fortunes are tied together,” said CFO and COO Frank Friedman of Deloitte LLP.
While futures for CFOs remain sunny, don’t expect them to catch up to CEO salaries. “I don’t predict there will be pay parity between the roles, but the prestige of the CFO role has risen since the onset of the current economic recovery,” Jarvis noted.
Mercer is a global consulting firm that specializes in health, talent, retirement, and investments. It conducts an analysis of CFO compensation every year. Results from the previous year are released every August.