Change In Overall CEO and CFO Compensation Sees Substantial Boost from Last Year, BDO Analysis Finds

October 2014

Ariel Kouvaras
Bliss Integrated Communication
646-386-2926
Ariel@Blissintegrated.com
 

Chicago, IL – CEO compensation across eight industry verticals jumped 12.6 percent from fiscal year 2012 to fiscal year 2013. CFO compensation also experienced an impressive increase of 8.2 percent during the same time period, according to an analysis of 600 mid-market public companies conducted by BDO USA, LLP, a leading accounting and consulting organization. Despite notable compensation increases across both C-Suite functions, total average CEO compensation ($3,034,366) is significantly higher than that of its CFO counterpart ($1,158,664).

"Executive compensation levels and structures are often directly tied to national and global economic conditions. The percentage increases for both CEO and CFO compensation this year support the theory that the Great Recession is behind us, and businesses are once again investing in top executive talent," said Randy Ramirez, a senior director in the Global Employer Practice at BDO. "As anticipated, however, in stronger markets, companies are favoring pay-at-risk compensation programs, which directly tie executive compensation to company performance. This is especially true for CEOs who are receiving 60 percent or more of their compensation in the form of equity."

Company size also impacts CEO and CFO compensation levels. As suspected, on average CEOs at companies in the largest revenue group ($650 million to $1 billion) receive higher overall total direct compensation than those in the smallest revenue group ranging from $25 million to $325 million ($3,355,050 and $2,824,121, respectively). The same is true for CFO compensation, with those in the highest revenue category receiving an average of $1,248,338 in overall direct compensation and an average of $1,006,746 in total direct compensation in the smallest revenue range.

Surprisingly, however, the smallest revenue category for CEOs experienced a substantial 39 percent increase in compensation, significantly larger than the 8 percent and 3 percent growth rates that CEOs within the middle revenue group ($325 million to $650 million range) and largest revenue group experienced. For CFO compensation, this also holds true. The study finds that CFO compensation at companies in the smallest and middle revenue groups grew 15 percent and 10 percent, respectively. However, compensation for CFOs in the largest revenue group only grew 1 percent over fiscal year 2012.

 

2013 CEO Pay

2013 CFO Pay

CFO as % of CEO Pay

Energy

$5,129,630

$1,788,635

35%

Real Estate

$4,553,611

$1,687,514

37%

Technology

$3,733,497

$1,554,539

42%

Financial Services – Non-banking

$2,843,207

$960,820

34%

Retail

$2,565,727

$798,102

31%

Healthcare

$2,552,529

$1,049,741

41%

Manufacturing

$2,310,889

$995,817

43%

Financial Services - Banking

$1,538,230

$631,464

41%


On average, CEOs in the energy industry receive the highest compensation out of all the surveyed industries ($5,129,630), with a 45 percent increase from last year. This represents a significant change from the past two years, during which real estate CEOs have held the rank of highest total compensation. Similarly, the highest paid CFOs are also in the energy industry, with average compensation at $1,788,635, a 21 percent increase from last year. As a result of improving economic conditions and domestic shale opportunities, the energy sector is currently immersed in a highly competitive business environment, creating a need for strong senior leadership. This year's BDO Oil and Gas RiskFactor Report finds that 80 percent of companies cite the ability to attract and retain key personnel as a top risk, up nearly 10 percent from 2013.

For both CEOs and CFOs, when it comes to change in total direct compensation, retail is at the bottom of all industries surveyed, dropping 4 percent and 11 percent, respectively. Unlike the energy sector, the retail industry continues to struggle with fallout from the economic downturn, emerging challenges from a rapid shift in consumer demands and the overall business landscape.

 

CEO % Change

CFO % Change

Energy

45%

21%

Real Estate

15%

13%

Technology

1%

6%

Financial Services - Non-banking

31%

12%

Retail

-4%

-11%

Healthcare

-1%

8%

Manufacturing

5%

12%

Financial Services - Banking

5%

-4%


These findings are from the fourth edition of The BDO 600 CEO and CFO Pay Study, which examines CEO and CFO compensation trends in publicly-traded companies with annual revenues ranging from $25 million to $1 billion in the energy, healthcare, manufacturing, real estate, retail and technology industries; and publicly-traded companies with assets ranging from $50 million to $2 billion in the banking and financial services industries. The study includes proxy statements that were filed between May 15, 2013 and May 15, 2014.

*Material discussed is meant to provide general information and should not be acted on without professional advice tailored to your firm's individual needs.

About BDO USA

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