Dive Brief:

• CFO salary increases edged out CEO increases in 2022, with CFOs on average seeing an increase in base salary of 5.5% while CEOs’ pay increased by 4.4%, according to a recent report by Compensation Advisory Partners.
• Most (80%) of both CFOs and CEOs saw increases in base salary, the report from the compensation consulting firm found. Of those companies making increases, CEOs saw a typical range between 3.4% to 7.4%, compared to the 3.6% to 9.1% range for CFOs.
• A notable portion of both CFOs and CEOs saw significant increases in total compensation for 2022, with 40% of CEOs and one-third of CFOs seeing a 25% increase in total compensation compared to their total pay for the prior year.

Dive Insight:

The report, based on proxy statements, provides an early look at payment trends even as filings continue to trickle in during March and early April.

The bigger CFO salary gains could be partially due to the fact that the finance chiefs’ role has changed over time from a pure reporting function — the  “level of sophistication for the role has been increasing,” Ryan Colucci, principal for CAP and the author of the report, said in an interview.

Lingering stresses from the COVID-19 pandemic — which put particular strain on certain roles including the chief legal or chief human resource officer as well as CFOs — could also be contributing to the boost in salary, for that matter.

Executive team priorities have shifted since the pandemic, with individuals searching for a greater work-life balance which could be causing both higher turnover in these roles — Colucci has seen greater CFO turnover over the past six to 12 months, he said — as well as efforts by companies to hang on to skilled, dependable executives.

“I think if you have someone good, you want to reinforce it with a nice increase,” he said.

Equity awards also remained the bulk of the pay mix for the majority of executives, representing two-thirds of total compensation for CEOs, and 56% of total compensation for CFOs. Additionally, while top executives saw higher increases in total compensation compared to their finance chiefs, they were also more prone to significant fluctuations in the area of incentive compensation.

A higher percentage of CEOs experienced increases or decreases of 25% or more concerning their incentive compensation than CFOs, with one-fifth of companies keeping their equity awards on par with the prior years’ grants.

Raises for U.S. CFOs of small to mid-sized businesses outpaced inflation, an August report by French fintech startup Spendesk showed, surging 16% from 2021 to reach approximately $224,000.

Colucci expects future filings to continue to show salary increases in 2022. As companies facing economic headwinds seek out steady financial leaders, increases “might be a little preventative” from some companies as they look to entice their financial leaders to stay put, he said.

“I think, not that there's a CFO shortage by any means, but I think because it is a more important role than it was maybe five, 10 years ago, I think that kind of lends itself to more movement,” he said. “I don't see it slowing down. I think the pace of transitions will probably keep up for this year.”

While CFO base salary increases beat out top executives, CEOs still saw higher increases in total compensation, according to the report. The increase in total compensation on average was mild, rising by 4% for CEOs compared with the 2% average for finance chiefs. However, 40% of CEOs and approximately 33% of CFOs saw a significant 25% increase in total compensation compared to their total pay for the prior year.

This could also be driving trends in CFO payments —  “the biggest thing driving the trend of CFO pay going up is that CEO pay is going up, and other executives follow,” Rosanna Landis Weaver, director, wage justice & executive pay for consumer advocacy group As You Sow wrote in an email to CFO Dive.

CEO pay has continued to increase, a trend that shareholders will likely push back on as company performance wobbles ahead of a downturn. “That will be particularly true if we see companies that try to game ‘pay for performance,’” she wrote. “Shareholders are clear that structures should mean pays goes down when performance goes down.”

“I have never read in a proxy statement that the company’s performance is influenced by externals when the externals are positive,” Weaver wrote in an email, noting that “when the externals may affect performance on the downside, we read endless language about how challenging things are. Shareholders are becoming cynical about that.”

Companies are gearing up for an environment where they will soon need to share further details surrounding both executive pay and financial performance. Pay-versus-performance rules, which were adopted last year by the Securities and Exchange Commission, require large public companies to disclose additional information regarding executive compensation, including a table that covers compensation and financial performance indicators.

The financial performance measures will include the companies’ total shareholder return and net income, according to the SEC. 

Executive pay policy rejections ticked up in 2022 from 2021, according to recent data from Willis Towers Watson, up to 86 last year compared to 71 in the year prior — marking the highest number of rejections since “say-on-pay” was made mandatory in 2011, the company said.