It’s a good time to be a CFO. As BizNews Premium partner The Wall Street Journal reports, finance executives in the US have been rewarded handsomely for guiding their organisations through an unprecedented crisis. – Jackie CameronÂ
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CFO Pay Rises as Their Companies Navigate Coronavirus Pandemic
Median pay for finance chiefs at the largest U.S. companies rose 7% during the 2020 fiscal year, largely driven by stock-based compensation
April 15, 2021 8:00 am ET
Finance executives at America’s biggest companies received a collective 7% pay rise last year as many of them steered their firms’ finances through the pandemic, though not all saw their compensation increase.
Chief financial officers at the largest 100 companies in the S&P 500 by market capitalization that disclosed executive pay through April 12 received 7% more in median pay in 2020 than a year before, equal to about $6 million total, according to data provider MyLogIQ. Pay packages were boosted by an increase in equity-based compensation. Median pay represents the midpoint of all companies in the data set.
CFOs last year played a central role in navigating their companies through the economic downturn caused by the coronavirus pandemic. Many businesses shored up cash, slashed costs and temporarily cut executive salaries amid lockdown orders aimed at slowing the spread of the virus.
Just a few months later, stock markets rebounded as policy makers provided stimulus funds and investors turned more optimistic about the recovery. This also propelled CFO’s equity-based compensation. The median value of their stock grants rose 9% to $2.7 million in 2020 compared with the prior year. Stock option awards, which allow executives to buy shares at a specific price, increased 13% to about $1 million during that time. Equity awards are valued at the time they are granted and don’t necessarily represent take-home pay in a given year.
Some companies, including mattress maker Sleep Number Corp. and specialty glass company Corning Inc., handed their executives stock awards for temporarily giving up part of their salaries. These awards and other changes to stock-based pay amid the pandemic were key factors for the increase in equity compensation, said Courtney Yu, director of research at data provider Equilar. “2020 is going to be a little bit of an outlier,” Mr. Yu said, referring to the fact that some companies temporarily tweaked how they award stock to executives over the past year.
Pay packages for CFOs increased at 59 out of the 100 S&P 500-companies, according to a Wall Street Journal analysis of MyLogIQ data. Some finance chiefs at companies that struggled during the downturn received less pay, including Leeny Oberg at Marriott International Inc. and Pierre Breber at Chevron Corp. Ms. Oberg was paid $3.5 million, down 23% compared with 2019, while Mr. Breber got $8.4 million, down 27% from the prior year. Neither executive received an annual bonus for 2020. Other companies that took a hit offered executives bonuses or stock options.
Carolina Dybeck Happe, who started as General Electric Co. ’s finance chief in March 2020, earned significantly more than her predecessor Jamie Miller earned in 2019, her final full-year as CFO, due to one-time stock awards. Ms. Happe earned $23.8 million last year, while Ms. Miller earned $10.5 million in 2019. The company’s revenue declined 16% in 2020 to $79.6 billion compared with 2019, and profit swung to $5.2 billion, from a $5.4 billion loss the year before.
Ms. Dybeck Happe’s package included a roughly $8 million new-hire stock-option grant that vests after four years. She also received a one-time stock award valued at about $7 million that will pay out if the company’s stock price appreciates significantly through September 2025. GE declined to comment beyond its filing.
Approximately 30% of S&P 1500 companies that have held their annual meeting already modified their bonuses because of the pandemic, advisory firm Willis Towers Watson PLC said. About half of those companies increased them, while 20% reduced them. The remaining companies revised their targets or performance metrics.
Median annual bonus pay rose 2% in 2020, to about $1.1 million, according to MyLogIQ.
Companies with fiscal years ending on Dec. 31 typically decide on bonuses at the end of the year and pay awards early in the following year. “It’s not easy, and it takes good judgment,” said Melissa Burek, a partner at consulting firm Compensation Advisory Partners LLC, discussing how boards have come to the decision to modify their pay plans amid the pandemic.
CFOs made about one-third of what CEOs made last year, according to MyLogIQ. The figure hasn’t changed much since the rise in stock-based compensation in the 1990s, according to Don Delves, managing director at Willis Towers Watson. “The CEO is seen as having a more significant influence on stock performance,” Mr. Delves said, attributing higher salaries for chief executives to larger stock awards in their long-term incentive plans.
Still, some CFOs received pay packages that came close to rivaling those of their CEOs.
John Stephens, who stepped down as CFO at AT&T Inc. last month after a decade in the role, in 2020 earned 77% as much as John Stankey, the telecommunication company’s CEO, according to a filing. Mr. Stankey, who took over as CEO in July, asked for a pay cut during the pandemic, the company said, noting that it was also a unique year given the CEO transition. Mr. Stephens in 2019 earned 52% of former CEO Randall Stephenson’s total pay. “Compensation for all of our executive officers reflects the responsibilities of serving as an executive officer of a Fortune 10 company,” AT&T said.
CFO-pay could keep climbing amid the economic recovery and strong competition for experienced executives. “There is such a high demand for CFOs that I would say every CFO has a little extra leverage right now,” said Barry Toren, who leads the CFO-practice for North America at recruitment firm Korn Ferry.
Write to Kristin Broughton at [email protected]
