Executive Summary
CFOs play a critical role in managing risk and the financial health of their company. As companies navigate technological advancements, globalization, increased competition, and evolving macroeconomic conditions, the CFO role has expanded to take on broader strategic responsibilities.
With the increase in the scope and complexity of the CFO role, pay practices have also evolved. Differences in CFO pay practices are often shaped by sector-specific factors, such as the complexity of financial operations, exposure to regulatory scrutiny, pace of innovation, and capital intensity. The competitive landscape for finance talent also varies by industry, further influencing pay levels/design.
In this CLEARthinking, we examine how CFO compensation compares across sectors, analyzing target CFO pay levels, pay mix, and recent growth trends among 600+ mid-cap companies across 10 sectors.
Target Total Direct Compensation
In comparing CFO pay across sectors, we analyzed target TDC for companies with market caps between $2B and $10B. Provided below is a summary of median TDC by sector, with additional detail provided in the Appendix.
Compensation Elements & Mix
On average, mid-cap CFOs have a pay mix of 42% target cash compensation (salary + target bonus) and 58% target LTI, with significant variation by sector.The highest paying sectors provide over 60% of TDC in LTI on average (i.e., Information Technology, Communication Services, Healthcare, and Energy).
Incumbent Annual Compensation Growth
All sectors are increasing emphasis on LTI, with incumbent CFO annual LTI increasing ~10% to 20% per year vs. ~5% to 10% for target cash comp, resulting in TDC increasing ~8% to 13% per year (based on annualized growth data over two recent fiscal years).
Turnover Rates
15% of mid-cap companies disclosed a new CFO, with Utilities having the highest turnover rate (26%), and Real Estate having the lowest (2%).
