Hailey Robbers is a Senior Research Analyst at Equilar, Inc. This post is based on an Equilar memorandum by Ms. Robbers.
When it comes to executive compensation, the focus is often placed on the chief executive officer (CEO), yet the buck doesn’t necessarily need to stop there. For example, the means by which companies incentivize and reward their chief financial officer (CFO) is often overlooked. While not as high-profile as the CEO, companies must be cognizant that the CFO is an integral part of the business, and thus, must be compensated as such. As a way to attract and keep executive financial talent, companies are tasked with finding the right balance between the appropriate compensation for retention, while simultaneously not over-paying for a lackluster performance.
Over the past five years, CEOs in the Equilar 500 have seen their compensation steadily increase and pay mix trends change rather drastically. Options granted to CEOs have increasingly decreased in prevalence, while awards tied to performance have taken center stage, and rightly so. In contrast, CFO compensation trends have stayed relatively stagnant, with the most prominent increase in total compensation taking place this past fiscal year and changes in CFO pay mix contained to only a few sectors.