While the CEO-CFO relationship is one of the most critical parts of the business, one of the most important metrics is how a CFO’s pay stacks up against the CEO’s. While some of the differences for the largest companies can be surprising, new data suggests that while most CFOs got average salary raises, many CEOs can’t say the same.
In Compensation Advisory Partners’ (CAP) latest spotlight on CFO pay, the data shows that nearly three-quarters (72%) of CFOs got a raise last year. That’s significantly more than their CEO counterparts — only half of whom said the same.
Salary increases and target pay mix
The data suggests some CEOs may be avoiding giving themselves a raise. Median increases for CEO pay fell flat in 2023 to 0%, down from a 2.9% increase in 2022. For CFOs, the standard increase of 4% was the median figure; less than what other data sources previously found was the average raise CFOs were handing out to their teams this year.
For the half of companies whose CEOs gave themselves a pay bump, CFOs in those companies earned slightly more (5%). This comes as no surprise, since a company whose CEO is confident enough to give themselves a raise is more likely to give their CFOs higher increases too.
As for the makeup of total compensation, the desire for both CEOs and CFOs remained consistent. CEOs look for long-term incentives slightly more than CFOs. Year-over-year, despite rising costs and market uncertainty, CFO pay mix metrics are the same as last year. On average, 61% of total compensation is long-term incentives, 21% is bonuses and 18% is salary.
Bonus and long-term incentives
Bonus payouts in 2023 were largely consistent with overall company performance. Companies that experienced a decline in operating income paid bonuses 7% lower for CFOs and 8% lower for CEOs compared to 2022. In contrast, companies with improved operating income increased CFO bonuses by 5% and CEO bonuses by 2% over 2022 levels.
The median target bonus opportunities in 2023 remained unchanged, with CFOs at 100% of base salary and CEOs at 160%. Furthermore, 32% of companies raised the target bonus opportunity for CFOs, and 23% did so for CEOs.
As for the breakdown of long-term incentives which, as previously mentioned, makes up a large portion of total compensation, these figures remained largely unchanged from 2022 to 2023 and still make up a majority of performance plans for both CEOs and CFOs.
Additionally, there was nearly double the amount of time-vested restricted stock offered compared to standard stock options for both positions.
These types of incentives are also in place to prevent CFO turnover, a rate that is consistently among the highest in the C-suite. In 2023, the median tenure for CEOs was seven years, while for CFOs it is five years.
CAP’s report summarizes 2023 compensation actions among 132 public companies with a median revenue of $14.6 billion.
