CFO compensation is about one-third what CEOs make, according to an analysis by Compensation Advisory Partners (CAP), an independent consultancy. 

This is a drop from last year, when a BDO survey found finance chiefs' pay 42% of CEO pay.

To get its numbers, CAP compared 2020 compensation for CFOs and CEOs at 135 companies with a median revenue of $12 billion.

The median increase in cash plus equity for CEOs and CFOs was 3.3% and 4.1%, respectively. This indicates a more modest increase for CEOs compared to 2019, when the two leaders saw a 4.4% and 3.6% increase, respectively. This is primarily due to the impact of bonus payouts, CAP said.

Prevalence of base salary adjustments for CEOs and CFOs was approximately 10% lower compared to prior years, CAP found. Overall, 44% and 55% of companies provided increases for CEOs and CFOs, respectively. 

Among companies to provide salary increases, the median CEO gain was 4.1% and, for CFO, 4.3%, which is mostly in line with last year’s increases of 3.6% and 4%, respectively. 

CFO salary increases outnumbering those of CEOs has been a consistent trend for multiple years, CAP Principal Roman Beleuta told CFO Dive. There are two main reasons for that. 

First, external stakeholders like investors or regulators tend to focus most on CEO compensation. They view increases in the chief executive's pay as fixed, with little linkage to performance. Because of that, compensation committees will generally favor incentive-based raises for CEOs, especially equity, which creates more alignment with the company’s performance results and shareholder interests. 

Second, large company CEO salaries typically exceed $1 million. Prior to the 2017 Tax Cuts and Jobs Act, non-incentive compensation above $1 million was not tax deductible on the company's return. This makes companies less likely to increase salaries for CEOs once they reach $1 million, Beleuta said.

From a cash bonus standpoint, both CEO and CFO compensation remained flat, though CFOs saw a larger increase in long-term incentive pay. A partial explanation is that many companies award their long-term incentives (LTIs) based on a multiple of salary. Given that more CFOs received salary increases, the increase in LTIs for CFOs comes out slightly higher.  

CEO compensation packages are generally structured with a higher portion in LTIs to create alignment between the company’s success and shareholder value. 

Because the CEO generally exerts the most control over the direction of the company and its results, the linkage with shareholders is necessarily higher than other executives, Beleuta said. 

CFO vs. other executives

Looking at other executives' compensation, depending on the company structure, CFOs generally earn 20% to 30% more than a third-in-command, like a COO or divisional president, Beleuta said, though it varies widely. 

“For example, a COO or president of a large business unit at a company will have a total compensation package very close to or sometimes higher than a CFO’s,” he said.  

All told, companies generally maintained a balanced pay versus performance relationship this past year, despite large uncertainties. “CFOs had an important role during the challenging year, and compensation committees rewarded them appropriately, and generally at rates slightly above CEOs," Beleuta said.