The health-care sector saw the highest percentage of turnover; more than 4 in 10 CFOs moved on during 2006–07, very closely trailed by CFOs at IT firms. Those 24 months saw more than 1 in 5 CFOs relinquish their posts in the financial, consumer-services, industrial, consumer-goods, and utilities sectors. Energy-sector CFOs enjoyed the lowest turnover rate, just shy of 1 in 5.

Home-Team Discount?
Overall, according to Mercer, CFOs experienced significantly more turnover than CEOs last year — in one sector (IT) by a nearly 5-to-1 margin. All that change proved a mixed bag for finance staffers eager to move up. While companies did tend to choose their new CFOs from within (56 percent, versus 44 percent from outside), often the new CFOs did not earn what their predecessors made. On average, says Mercer, new CFOs in 2007 received 6.2 percent less than their predecessors. Only 1 percent of upwardly mobile insiders negotiated packages 20 percent larger than departing CFOs. Meanwhile, outsiders surpassed their predecessors' compensation packages 23 percent of the time, negotiating pay boosts in excess of 20 percent nearly 10 percent of the time. (For more on how to negotiate the best possible deal, see "Flexing Your Muscle.")

"There is not as much hiring between companies, and more emphasis on hiring from within versus a desire to get a big name," says George Paulin, chairman and CEO of Frederic W. Cook & Co., a national compensation consulting firm. "That has had a moderating effect on CFO compensation."

That may mean that macroeconomic reality trumps, or at least mitigates, the increasing importance of the CFO post. If so, CFOs hardly seem ready to settle for less. A recent survey by CFO Research Services (in conjunction with Ajilon) found that when a finance executive was considering a job offer from a new employer, compensation was identified as among the three most important criteria by 72 percent of CFOs; location, the second most commonly selected factor, was cited by just 47 percent.

For CFOs eager to bring home fatter paychecks, executive compensation critic Graef Crystal offers a note of caution. Using pay data from Equilar, Crystal scrutinized 2007 pay packages and market performance to find "the most relatively highly paid CFOs" and "the most relatively low paid CFOs" at 578 companies with revenues in excess of $3 billion. His report, cheekily titled "It's Good to Be the King CFO," ranked individual compensation packages based on their deviation from competitive pay predicted by models he devised.

Under that scheme, Goldman's Viniar topped Crystal's "most relatively highly paid" list by virtue of making more than six times what peer-group CFOs made. Conversely, Amazon.com CFO Thomas Szkutak appears to be working nearly for free, pocketing just $153,000 in total 2007 pay, a figure 95 percent below the level predicted by Crystal's model.

Beyond noting this year's eyebrow-raising high and low earners, Crystal's study sought to uncover the underlying reasons for wide variations in compensation. He quickly ruled out a correlation between pay packages and a company's total return less the total return for the S&P 500 (in other words, forget pay-for-performance). Instead, he attributes a third of the variation to two factors: company sales and pay risk in the CFO pay package (principally the stock-option component). A single factor governs another 37 percent of the difference in CFO pay: the extent to which a CEO earns more or less than a competitive figure compared with other CEOs. "The more the CEO is overpaid," says Crystal, "the more likely it is that the CFO will be, too." That could add an interesting twist to the due diligence that would-be CFOs conduct.

Assessing the compensation landscape may also become trickier as the United States moves from generally accepted accounting principles to international financial reporting standards, according to compensation consultant David Johnson at Ernst & Young. Long-term-incentive programs, which may span the transition period between GAAP and IFRS, may give rise to unintended payouts or other unanticipated results that shareholders or executives may question.

And yet the need to shepherd companies into an IFRS world is just one more reason that CFOs are likely to enjoy continued momentum regarding compensation. While few might care to bet on the direction of tomorrow's Dow Jones average, it's a far safer wager that CFO pay will continue to trend up.

S.L. Mintz is a deputy editor of CFO.

To see the results of Mercer's compensation survey, as well as a list of 2007's top-earning CFOs, click here.

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