Good morning. At many large U.S. companies, salary increases for CFOs continue to outpace those of CEOs. There is clearly a high demand for good finance chiefs.
New data released this morning by Compensation Advisory Partners (CAP), a consulting firm, examines 2023 pay outcomes for CFOs compared to CEOs at 132 U.S. companies across various industries with a median revenue of $14.6 billion.
In 2023, the median change in base salary for the CFO position was 4%, similar to last year’s 3.8% increase. For the CEO position, however, the median base salary change was 0%, well below the 2.9% median increase in 2022.
For those executives who received a bump to their salary, the median increase was 5% for CFOs and 4% for CEOs.
“We generally see CFO and CEO pay move together,” said Kelly Malafis, founding partner of CAP. “Although CFOs in recent years have received slightly higher overall increases.” This is occurring as companies compete to attract and retain good CFO talent in an uncertain and evolving environment, she said.
Total direct compensation, largely driven by higher long-term incentive (LTI) awards, was up 8% for CFOs and 5% for CEOs. LTI awards increased 11% for CFOs and 9% for CEOs (compared to 7% and 5% last year, respectively). LTI awards increased at a higher rate in 2023 than 2022, reflecting competitive pressures to deliver market competitive pay, according to CAP.
And CFO turnover outpaced CEO turnover. In 2023, the median tenure for CEOs was seven years, compared to five years for CFOs, according to CAP's data set. The CFO role is continuing to evolve with a more strategic focus, including becoming a strong partner to the board and senior management team, Malafis said. “Companies are willing to recruit that talent externally, which has increased turnover,” she said.
Looking back at 2023, one of the most prominent CFO hires was Hugh Johnston, who became the CFO and senior executive vice president of The Walt Disney Co. Johnston was a 34-year veteran of PepsiCo, and finance chief since 2010. At Disney, he was awarded an annual base salary of $2 million, according to an SEC filing. The compensation committee set a target bonus each year of not less than 200% of Johnston's annual base salary. He will be granted a long-term incentive award having a target value of 575% of the base salary.
CFO turnover is continuing this year. Taking a look at the S&P 500, for example, 4.8% of CFOs left their jobs in Q1 2024, compared with 2.8% who did so at the same time last year. Meanwhile, the incoming CFO figure of 5.8% was higher than last year’s 3.8%, according to Russell Reynolds Associates.
Will pay bumps for CFOs continue? As companies navigate the current labor market, CAP expects that "salary increases will trend back toward 3% that was the norm for many years,” Malafis said.
Have a good weekend.
Sheryl Estrada
sheryl.estrada@fortune.com
