Middle Market CFO Pay Increases Outpaced CEO Pay – BDO Survey

November 2017

Rosie Izzi
Bliss Integrated Communication
212-584-5482
rosie@blissintegrated.com
 

Technology and Real Estate Top Executive Pay, Manufacturing Shows Highest Increase

Chicago, IL – This year, compensation for the middle market executive fluctuated across company sizes and industries. According to the BDO 600: 2017 Survey of CEO and CFO Compensation Practices of Middle Market Public Companies, pay for CEOs increased at companies in the smallest revenue range. Meanwhile, CFO increases occurred at the small and midsized company level. Overall, total direct compensation (TDC) for executives decreased slightly (1.1 percent) and TDC for financial officers rose 1.5 percent.
 
2016 Average Compensation
 
Position Year Average Salary Bonus and Annual Incentives Stock Options Full -Value Stock Awards Other LTI TDC
CEO 2016 $683,072 $790,564 $340,262 $1,923,947 $32,493 $3,770,338
2015 $665,952 $747,013 $314,675 $2,060,984 $24,729 $3,812,353
Change over Prior Year 2.6% 5.8% 8.1% -6.6% 31.4% -1.1%
 
 
Position Year Average Salary Bonus and Annual Incentives Stock Options Full-Value Stock Awards Other LTI TDC
CFO 2016 $395,509 $298,016 $97,660 $670,101 $7,334 $1,468,620
2015 $382,107 $263,904 $112,474 $677,342 $10,552 $1,446,379
Change over Prior Year 3.5% 12.9% -13.2% -1.1% -30.5% 1.5%
 
 
In keeping with prior years, a majority of CEO and CFO compensation was comprised of long-term incentives (LTI) and equity. Sixty-one percent of CEO compensation was LTI and 39 percent was annual cash, through fiscal year 2016. CFO compensation was a bit more evenly distributed through the fiscal year, but still leaned toward LTI, showing a compensation mix of 53 percent LTI, 47 percent annual cash.
 
“In today’s business and legislative environment, decisions in the C-Suite are increasingly under a microscope, especially when it comes to compensation and pay,” says Tom Ziemba, a managing director in the Compensation and Benefits Practice at BDO. “Companies are making decisions cautiously, and this is reflected in the relatively small compensation moves shown in BDO’s data from a high level. Upon closer inspection, there were significant year over year changes in specific industries.”
 
Technology, Real Estate, Healthcare and Energy Are Top Paid, Manufacturing Increased Pay Most
Just as technology moves at a fast pace as companies constantly work to innovate, CEO and CFO compensation stays a cut above the rest in this industry as well. CEO and CFO compensation ended the year at $5,093,727 and $1,985,614, respectively. Conversely, bank executives saw the lowest TDC—$824,023 for CEOs and $378,485 for CFOs. Though TDC is low, the financial services - banking industry pays the highest percentage of compensation in annual cash.

Through FY 2016, the manufacturing industry led industries in terms of CEO and CFO pay increases, with 13 percent and 12 percent boosts, respectively. Compensation mix favored stock awards, followed by bonuses and annual incentives, for both groups. For CFOs, other LTI decreased through 2016, while full-value stock awards rose significantly.
 
“Following the election of President Trump near the end of 2016, a greater emphasis was placed on American manufacturing. We’ll be watching to see if this influence has any sort of impact on compensation next year, and whether the industry stays in this upward trend,” said Ziemba.
 
  CEO 2016 CEO 2015 CFO 2016 CFO 2015
Energy $4,271,056 $4,197,580 $1,944,062 $1,806,917
Financial Services - Banking $824,023 $751,174 $378,486 $388,651
Financial Services - Non-Banking $3,929,273 $3,632,586 $1,430,618 $1,291,575
Healthcare $4,589,657 $5,068,727 $1,585,340 $1,667,624
Manufacturing $3,620,759 $3,214,750 $1,380,378 $1,237,240
Real Estate $4,795,707 $5,052,096 $1,977,346 $1,910,658
Retail $3,043,102 $2,968,313 $1,072,680 $1,255,812
Technology $5,093,727 $5,691,652 $1,985,614 $2,006,873
 
 
Larger Companies Beckon with Larger Compensation Packages
As we’ve seen historically, compensation is correlated with company size—the larger the company, the more an executive can expect to be paid. However, just because compensation tends to be higher at larger companies, that doesn’t mean pay increases follow suit. According to this year’s report, CEO TDC for ranges from $2,503,708 to $4,966,755, and CFO pay ranges from $922,155 to $1,911,280. No matter the company size, full-value stock appears to be compensation of choice over stock options for both positions.
 
Company Size 2016 CEO Pay 2015 CEO Pay 2016 CFO Pay 2015 CFO Pay
$100 million - $500 million $2,503,708 $2,324,230 $992,155 $964,824
$500 million - $1.25 billion $3,927,393 $4,035,853 $1,520,200 $1,425,502
$1.25 billion - $3 billion $4,966,755 $5,187,866 $1,911,280 $1,994,808
 
 
About The BDO 600: 2016 Survey of CEO and CFO Compensation Practices of Mid-Market Public Companies
The BDO 600: 2017 Survey of CEO and CFO Compensation Practices of 600 Mid-Market Public Companies examined the compensation practices of publicly-traded companies in the energy, financial services–banking, financial services–nonbanking, healthcare, manufacturing, real estate, retail, and technology industries. Companies in the six non-financial service industries in our survey have annual revenues between $100 million and $3 billion. Companies in the two financial services industries in our survey have assets between $100 million and $6 billion. Data sources include data provided by Salary.com and public company data collected from proxies and other sources.
 
*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’s Compensation and Benefits Practice
BDO’s Compensation and Benefits practice offers an experienced and dedicated team of professionals who operate nationwide to seamlessly provide a comprehensive array of services to address client needs.
Our team provides tax, accounting, and consulting services for all types of compensation arrangements, including cash and equity incentives, merger and acquisition related issues, employee stock purchase plans, qualified and nonqualified plan arrangements and other related services.
 
About BDO
BDO is the brand name for BDO USA, LLP, a U.S. professional services firm providing assurance, tax, and advisory services to a wide range of publicly traded and privately held companies. For more than 100 years, BDO has provided quality service through the active involvement of experienced and committed professionals. The firm serves clients through more than 60 offices and over 500 independent alliance firm locations nationwide. As an independent Member Firm of BDO International Limited, BDO serves multi-national clients through a global network of 67,700 people working out of 1,400 offices across 158 countries.

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