The Advisors' Blog

This 7-page memo from Compensation Advisory Partners looks at how 2020 CFO pay compared to CEO pay, based on 135 companies with median revenue of $12 billion. As you might expect, annual incentive payouts were lower at some companies based on 2020 performance – and proxy-disclosed LTI awards don’t yet reflect changes due to the pandemic. CFO total compensation is about one-third of CEO total pay and the target mix hasn’t changed in a decade (if it ain’t broke…). Here’s more detail:

– Salaries: In 2020, the salary increase prevalence declined by about 10% from historical practice. We believe the COVID-19 pandemic was the main factor for the decrease. However, salary increases were still quite prevalent for CEOs and CFOs, at 44% and 55% of the sample, respectively. Median 2020 salary increases were 2.7% for CFOs (or 4.3% for those receiving an increase) and 0% for CEOs (or 4.1% for those receiving an increase).

– Actual Pay: The actual total cash compensation for 2020 was generally flat among our sample with only CFOs seeing a minor salary increase in salary levels. On a total compensation basis (including long-term incentive awards), the median rate of increase continued to trend lower for CEOs and was generally flat for CFOs (3.3% for CEOs and 4.1% for CFOs).

– Target Pay Mix: The pay program structure for CEOs and CFOs has remained largely unchanged since 2011. CEOs continue to receive less in the form of salary and more in variable pay opportunities, especially LTI, than CFOs.

– Target Bonuses: Target bonus opportunities as a percentage of salary remained unchanged for the CEOs in the sample. For CFOs, the 25th percentile increased to 90% of salary from 80% last year. We expect target bonuses will continue to remain largely unchanged.

– LTI Design: The use of two different vehicles to deliver LTI remains the most prevalent approach, used by almost 60% of companies. Approximately 30% of companies in the sample use all three equity vehicles (stock options, time-based stock awards, and performance plan awards).

The portion of LTI awards granted in Performance plans decreased slightly in 2020 at the expense of higher time-based awards. The stock option portion remained unchanged. Even though most of the awards in the analysis were granted before the onset of the COVID-19 pandemic (due to disclosure rules), the minor increase in time-based awards was expected.

– Liz Dunshee