What up-and-coming executive wouldn’t yearn for the CEO’s job and the staggering pay that comes with it?
Quite a few, actually. When recently compiling a gallery of potential future corporate leaders, Fortune found that some management stars didn’t want the position. There was a time when “becoming CEO was a kind of holy grail,” says Dick Patton, a CEO succession expert at the Egon Zehnder executive search firm. “That is not the case anymore.”
There could be a few reasons why. The job is becoming harder as employees assert more power. Alphabet employees in the past year have marched in protest against company layoffs and a contract with the Israeli government, for example. It has also become more politicized, as Delta’s Ed Bastian, Disney’s Bob Chapek, Salesforce’s Marc Benioff, and others have found. But there’s another little-noticed significant factor: money. While the average CEO’s pay has skyrocketed over the past several years, the pay of other C-suite executives like CFOs, CHROs and general counsels in America’s largest companies has increased even more, according to a Fortune analysis and corporate experts.
“There’s less financial incentive to be a CEO,” says Laszlo Bock, former HR chief at Google and co-founder of Humu, a maker of HR-related software. “The compensation of the layer below the CEO has risen at a higher rate than the CEO.”
Compensation catch-up
Fortune reviewed compensation numbers collected by data company Equilar for CEOs and other C-suite executives at the S&P 500 companies in 2022, and compared them to 2012 levels. (More on that methodology below).
Gains among CFOs, who are usually the second-highest paid behind CEOs, are the most clear. Among the 10 companies in the Fortune 20 that shared the salaries of both CEO and CFO over the past 10 years, the CFO’s pay has risen from an average of 34% of the CEO’s pay in 2012 to 44% of the CEO’s pay in 2022.
In 2012, for example, Ford Motor Co. paid CFO Robert Shanks $5,181,848, which was 25% of CEO Alan Mulally’s pay of $20,955,806. Last year, the company paid CFO John Lawler $8,956,211, which was 43% of CEO James Farley’s pay of $20,996,146. In 2012, CVS Health paid CFO David Denton $6,062,079, which was 30% of CEO Larry Merlo’s pay of $20,330,097. In 2022, the company paid CFO Shawn Guertin $14,630,713, which was 69% of CEO Karen Lynch’s pay of $21,317,055.
Another C-suite member, the general counsel, has done even better in terms of pay increases. Among the three companies in the Fortune 20 that could be compared over the past 10 years, the general counsel’s pay has almost doubled as a percentage of the CEO’s pay—from an average of 18% to 34%. At Cardinal Health the percentage rose from 18% of the CEO’s pay to 38%; at Chevron, from 16% to 35%; at McKesson, from 19% to 29%.
The trend is happening in the biggest firms—“major publicly held companies where a CEO might be making $15 million to $25 million a year,” says Bock. It’s appearing throughout the sub-CEO C-suite, he says, from the CFO usually making the most to the CHRO, who usually makes the least, with CMOs, CIOs, and others in between. In his work at Humu, Bock sees the pay of all C-suite members at many companies, including executives whose pay isn’t publicly reported, and says that in the biggest companies even the CHRO “may be making $8 million.”
Glass Lewis, a firm that advises institutional investors on voting their shares at annual shareholder meetings, has observed the same trend, but frames it in a different way. “Among the largest companies, we’ve seen a dramatic decline in the number of companies with excessive executive pay inequity,” says Maria Vu, senior director of the firm’s North American compensation research. That is, the CEO’s pay isn’t as large a multiple of the other top executives’ pay as it used to be. She says that in 2013 more than half of the S&P 500 companies had “outsized CEO pay” relative to the rest of the C-suite, while today only about 20% do.
Vu measures pay disparity in the C-suite because Glass Lewis sees it as a corporate governance indicator. When CEOs make vastly more than the rest of the C-suite, “that could discourage a healthy discourse between them and their direct reports,” she says. “It may indicate over-emphasis on one person for the success of the company.” From her perspective, the narrowing of the C-suite pay gap is good news.
Job hopping and less scrutiny
Multiple factors have converged to turbocharge the pay of those just below the CEO. The most important is what Bock calls “the de-stigmatization of job-hopping, even at the executive level.” That used to be bad form. Now it’s the norm, and each move, or even a threat to move, is a chance to negotiate pay upward.
The numbers spiral higher as employers try to hold valued C-suite executives by giving them large grants of company stock that won’t vest for years. For example, Apple CFO Luca Maestri, chief operating officer Jeff Williams, and general counsel Kate Adams each hold unvested stock awards that were worth $51 million as of last September, according to the company’s most recent proxy statement.
Some C-suite jobs also command higher pay because the job has changed. “If you were the CFO 20 years ago, you were the chief accountant,” says Alan Johnson, a New York-based compensation consultant who focuses on financial executives. “Now your job is bigger and may have operations reporting to it.” For example, a Deloitte survey last year found that 28% of CFOs say their direct reports include their company’s chief information officer or other IT head.
One other factor may contribute to rising pay just below the CEO: Those positions largely escape public scrutiny. “Certainly there are outlandish pay packages,” says Johnson. “But when you’re getting beat on, the focus is almost always on the CEO. No one asks about the number two, three, or four job.” In addition, pay for C-suite members other than the CEO and CFO aren’t always reported.
Staying below the radar also carries an important non-monetary allure for candidates who could have otherwise tried out for the top job: avoiding the controversies and even dangers that CEOs have attracted in recent years. In a 2021 survey of security executives at large U.S. companies, conducted for Ontic, a security software provider, 58% of respondents said their CEO had received physical threats “as a result of expressing a position on racial and/or political issues,” while 40% said their CEO had received physical threats “as a result of not expressing a position on racial and/or political issues.” In July an irate customer of Memphis Light Gas and Water who had lost electricity drove to CEO Doug McGowen’s house and threatened to run over his wife. Being a corporation’s public face (or that person’s spouse) has a downside.
Ambition isn’t dead. Plenty of energetic strivers will still fight to be CEOs. But more than in the past, corporate ladder-climbers balancing costs against benefits may decide there’s a better deal.
Methodology: Equilar compiled compensation data for CEOs and other C-suite executives at the S&P 500 companies in 2022, and compensation data from those same companies that were in the S&P 500 in 2012. Companies at which the CEO held the job for only part of a year are not included. Compensation totals for each company’s chief executive officer and other C-suite executives are as reported in the Summary Compensation Table in each company’s proxy statements. Note that SEC rules require companies to report the compensation of the CEO, the CFO, and the three other mostly highly paid executive officers. As a result, not every C-suite position’s pay is included for every company in every year. A few companies paid the CEO little or nothing. For example, in 2012 Alphabet CEO and co-founder Larry Page received total compensation of $1. In these cases, comparisons with other C-suite members’ pay are not meaningful and are not included in our analysis.
