CFO Compensation

The WSJ has an interesting piece on CFO compensation. The article noted that median pay "for chief financial officers of S&P 500 companies surged 19% to $2.9 million last year, as profits and stock valuations rebounded and some finance chiefs assumed broader responsibilities".  Some received "less than $600,000" while other were paid "more than $60 million."  As the article noted, five CFOs "received more than $20 million in compensation.

There are several issues that arise out of this data.  First, CFO compensation has only been required to be reported for a few years.  The SEC used to required disclosure of CEO comp and the four highest paid officers.  That has been changed to the CEO and CFO and three highest paid officers.  See Item 402 of Regulation S-K (requiring disclosure of "All individuals serving as the registrant's principal financial officer or acting in a similar capacity during the last completed fiscal year ("PFO"), regardless of compensation level;").  CFOs, therefore, have a better basis for comparison.  One suspects that this has put upward pressure on CFO compensation.

Second, it would be interesting to determine who really sets CFO compensation.  While the board determines the compensation of the CEO, it is possible that in many cases the authority to determine compensation for other officers, including the CFO, has been delegated to the CEO.  To the extent concerns exist over CFO compensation, therefore, they would need to address the source of the compensation decision.

Third, it would likewise be of interest to see what if any correlation exits between CEO and CFO compensation.  It might be that the levels of CEO compensation are related to the level of compensation for other officers.