CFOs close the pay gap, slightly, on CEOs
Public-company CFOs’ pay rose 4.9% from the previous year, a lower percentage increase than a year ago, but a rise that helped trim the US CFO-to-CEO pay gap.
With CEO pay growing 0.7% and with the CFO role transforming to include more strategic and operational duties, CFO pay as a percentage of CEO pay is 39.8% for fiscal 2014, up from 38.2% in 2013, reaching the highest mark in the past four years (see chart below).
“We expect the gap to close more over time as a lot more responsibility has been given to CFOs, specifically more on the strategic elements of a company,” said Randy Ramirez, a senior director in the Global Employer Services practice at BDO. “It’s a position that’s definitely morphed over the last ten years.”
CEO pay remains a hot topic for company boards and shareholders. Rules proposed by the US Securities and Exchange Commission would require companies to disclose the relationship between executive compensation and the organisation’s financial performance. The CFO-to-CEO pay gap is one measure organisations can use to help ensure their compensation practices are sound.
“We like to look at this ratio to make sure companies are being vigilant about their compensation and making sure their evaluation and their goal-setting are still relevant,” Ramirez said.
Average pay for CFOs in the BDO 600 rose 5% to $1,215,957. The companies studied have revenue between $25 million and $1 billion or have assets between $50 million and $2 billion from the banking and financial services sectors.
Pay for finance chiefs at smaller companies (between $25 million and $325 million in revenue) declined from about $1 million last year to $785,005, a 22% drop, one year after it rose 15%. Evidence gathered by BDO suggests that some of those CFOs took advantage of stock options in 2013 that were not available in 2014.
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—Neil Amato (firstname.lastname@example.org) is a CGMA Magazine senior editor.