US CEO pay grows at higher rate than CFO pay

The CEO-to-CFO pay gap is growing, at least at a wide selection of US public companies.

Average compensation for chief executives at midsize organisations rose 12.6% between fiscal 2012 and fiscal 2013, and average CFO pay grew 8.2% during the same span, according to a survey by accounting and consulting firm BDO.

The average pay for CEOs at 600 public companies with revenue between $25 million and $1 billion is $3.03 million; average CFO pay for the same companies is $1.16 million. CFO pay as a percentage of CEO pay has dropped during the past two years (see chart below).

Last year, CEOs received slightly larger rises in pay than CFOs did. This year, the margin grew.

CEOs at companies at the smaller end of the revenue range had the highest average pay increase, 39%. CEOs at midsize and large companies had increases of 8% and 3%, respectively. For CFOs at the smallest companies, with revenue between $25 million and $325 million, pay increased 15%. At midsize companies, the increase was 10%, and at large ones, 1%.

Sector pay for both executives varied widely. Average compensation in energy rose 45% for CEOs and 21% for CFOs, but compensation in retail dropped an average of 4% for CEOs and 11% for CFOs.

“Executive compensation levels and structures are often directly tied to national and global economic conditions,” Randy Ramirez, a senior director in BDO’s Global Employer Practice, said in a news release. “The percentage increases for both CEO and CFO compensation this year support the theory that the Great Recession is behind us, and businesses are once again investing in top executive talent. As anticipated, however, in stronger markets, companies are favouring pay-at-risk compensation programmes, which directly tie executive compensation to company performance.”

The US is among the countries in which the gap between estimated and ideal pay for CEOs and unskilled workers was the largest, according to an analysis by Harvard Business School and Chulalongkorn University in Bangkok.

Shareholders in US companies have grown more vocal about compensation for executives, sometimes voting against increases deemed to be too high. According to previous BDO research, there is a trend toward more performance-based pay and transparency regarding the relationship of a company’s total returns to the CEO’s compensation.

CEO pay vs. CFO pay

CFOs’ average pay has risen 11.5% since fiscal 2011, according to BDO data, but that gain is not enough to trim the gap with CEO pay, which increased 15.8% during the same period.