Dive Brief:

• Pay levels for CFOs are approximately 42% of CEO pay, according to a BDO study. The study involved analysis of 600 companies' 8K SEC filings between March and June.

• The base compensation of CEOs and CFOs of middle market companies has dropped between 20% and 50%, according to the data sample.

• The reported reductions follow increases in total direct compensation (TDC) for CEOs and CFOs of 4.7% and 4.4%, respectively, in BDO's 2019 research.

Dive Insight:

Compared to CEOs, CFOs' average compensation mix in 2019 was more evenly split between cash and long-term incentive (LTI) income and equity, with equity slightly higher than cash.

"CFO compensation continues to be largely based on variable or incentive pay," Terry Adamson, BDO managing director, said. "Because CFO pay levels are less than half (42%) of what CEOs receive, CFO salary increases tend to be higher than those of CEOs."

On the flip side, CFOs received significantly fewer pandemic-related pay cuts than CEOs. "Part of this is because there was significantly more compensation to claw back from CEOs, of course," he said. "But it also reflects companies' recognition that the optics of reducing CEO pay carried more weight than reducing CFO pay."

Retail and manufacturing industries' CFOs experienced the largest percentage increase on average in TDC (6.9%). Healthcare industry CFOs saw a 5.2% increase, while technology and energy industries' CFOs each experienced a 4.0% increase. Technology CFOs have the highest average compensation at $2,479,656; CFOs of financial services-banking companies fall on the lowest end at $478,408.

"Reductions in executive pay have been necessary across sectors and industries in order for companies with pinched cash flow to keep financially viable, but also to reinforce a sense of solidarity with employees outside the C-suite," Judy Canavan, Managing Director of BDO's Global Employer Services, said. "With ever more scrutiny on executive pay, companies that have eschewed making compensation changes at the C-level may face blowback from stakeholders and employees during what is an already volatile and unstable time."

The onset of the pandemic has magnified a growing trend of scrutinizing executive pay levels, further challenging compensation committees to align the interests of executives with shareholders and other stakeholders, the study said.

"Greater incentive compensation, which is more common among larger companies, underscores that compensation committees increasingly are looking to link compensation to company performance," Adamson said. "In a COVID-19 climate, that becomes more challenging [...] given the financial turbulence. The question then becomes: which metrics are appropriate and how can we set goals with reasonable rigor?"