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CFO-CEO pay chasm grows

Roy Harris | Aug. 30, 2011
Finance chiefs at middle-market companies, making 40 per cent the CEO average, also find pay rising more slowly.

Middle-market finance chiefs are earning an average $927,743 --- about 40% as much as the $2.3-million average for CEOs --- a study about to be released by BDO USA shows. But the numbers also show the healthy 19% pace of CFO pay growth falling short of the 25% average rise scored by their bosses.

BDO interprets the widening gulf between CEO and CFO compensation as a reflection of the higher number of CEOs getting performance-based pay --- a category that has done particularly well of late. As more CFOs are paid that way, the pay gulf could narrow.

Not surprisingly, the research also shows broad differences in pay on an industry basis, with real estate recording the highest pay levels in the mid-market: $1.30 million and $3.36 million for CFOs and CEOs, respectively. Less expected, perhaps, is that that banking turns out to be the lowest-compensated category, with finance chiefs averaging $442,425, and chief executives averaging $1.04 million.

Narrowest Gap? Health Care

Technology CFOs and CEOs were only slightly behind their real-estate sisters and brothers. Tech finance chiefs averaged 1.16 million, 37.9% of the $3.01 million average for tech CEOs.

The narrowest gap between CFO and CEO pay was registered in health care, where the $944,861 average for finance chiefs was 46.6% of the $2.03 million earned by their bosses. The widest chasm? In the non-banking area of financial services, CFOs made only 34.2% of what the CEOs were paid: $741,711 versus $2.17 million.

The research by accounting and consulting firm BDO covered 600 public companies with annual revenues between $25 million and $1 billion, and is based on proxy statements filed between May 15, 2010, and May 15, 2011.

Expect Some 'Catch-Up'

"CEOs have always earned significantly more than other executives," Randy Ramirez, a senior director in BDO's Compensation and Benefits Practice, said, "but we have seen an even greater divide in recent years due to an increase in CEO pay leverage tied to the performance of their company's equity."

He added, "We expect CFO pay to start catching up within the next few years as the emphasis on pay-for-performance trickles down to other top executives."

BDO also publishes the BDO 600 Survey -- Board of Director Pay Study that includes Board of Director compensation for the same 600 public companies.


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