CFOs’ Lower Bonuses Cut Into Compensation Growth

Advancement in main financial officer’s total spend slowed for the 2nd consecutive 12 months in 2019, according to new data from Compensation Advisory Associates (CAP). The consulting agency claimed the slower development was mainly thanks to decreases in bonus payouts, which have been in transform pushed by a slowdown in companies’ financial performances

A little a lot more than two-thirds of the 110 public businesses (median revenue, $thirteen billion) in CAP’s sample amplified CFO salaries in 2019, with the median maximize of 4%. That was slightly underneath 2018’s median maximize of 4.eight%. Including all businesses, the 2019 maximize was three%.

Bonuses for CFOs from all businesses fell three.two% from 2018. Profits and revenue development in 2018 for the sampled businesses have been the two earlier mentioned nine%, but for 2019 revenue rose only three% and working revenue only 5%. Nonetheless, bonus payouts on ordinary have been nevertheless earlier mentioned target. Median target bonus opportunities remained unchanged, which for CFOs has been one hundred% of wage for the very last six yrs.

Variable spend opportunities represented 59% of CFO compensation in 2019, up from fifty six% in 2018.

“Boards and senior management continue on to emphases the alignment of spend results with firm performance,” CAP claimed in its report. “We hope the craze in reduced bonuses to continue on in 2020 in gentle of the COVID-19 pandemic and the resulting financial downturn,”

Prolonged-term incentive spend opportunities, on the other hand, rose eight.three% for CFOs in 2019, in line with the maximize in 2018. On ordinary, performance-primarily based strategies accounted for almost 60% of LTI awards, a craze that CAP sees continuing as boards embrace it around time-primarily based fairness awards. The other portion of LTI was delivered by way of an equivalent blend of stock solutions and time-restricted stock awards.

“Since several businesses made their fairness grants early in 2020, prior to the affect of the pandemic on the stock marketplace, we may well not see the pandemic’s affect on LTI concentrations until eventually the 2021 grants are disclosed,” claimed CAP.

In truth, since of the trouble in location performance-primarily based plans in the time of a international pandemic, CAP expects to see an maximize in time-primarily based awards for fairness grants permitted just after the pandemic started off. Nonetheless, it expects the maximize to be a “short-lived shift.”

Total direct compensation for CFOs, at the median, amplified three.six%. That was down from 7.4% in 2018 and nine.nine% in 2017. In comparison, total direct compensation for CEOs rose 4.4.% in 2019. Total compensation for CFOs proceeds to be about a person-third that of CEOs.

By sector, CFOs in utilities, financial providers, materials, facts technological innovation, and wellbeing treatment saw the largest increases in median total compensation. Utilities considerably outpaced development in other sectors, with median CFO compensation increasing almost 19%. CAP attributed the sharp maximize to a 7% development in working revenue for the sector.

The businesses in CAP’s sample had a fiscal 12 months-end between September 1, 2019, and January 1, 2020.