Admittedly, a fair number of our survey CFOs found that revived share prices landed their options squarely in the money. Buttressed by a $10.1 million gain on the options he exercised, Apple Computer's Fred Anderson returned to our list of top-paid CFOs in the number-two spot, after a one-year hiatus. Other big option winners last year included Navistar International's Robert Lannert ($5.6 million from exercised options), AFLAC's Kriss Cloninger ($5.5 million), and Merck's Judy Lewent ($4.7 million).

But despite some respectable gains, the overall median value of stock options dished out to finance chiefs last year (calculated using a binomial model) dropped from 49.6 percent of expected total pay to 44.2 percent.

The drop-off in gains from exercised options is even more striking when you look at how some of the best-paid CFOs earned their keep.

Our number one, BOA's Hance, did not cash any stock options in 2002, but he pocketed a $11 million bonus. Bear Stearns CFO Samuel Molinaro, who vaulted to number three on the list, did not cash any stock options, either; the lion's share of Molinaro's $8.2 million total direct compensation came from an $8 million bonus. Likewise, John Hancock Financial CFO Thomas Moloney, number four, did not make any money by exercising his stock-option grants. Instead, Moloney picked up $4.6 million in restricted stock, which pushed his total direct compensation to $7.7 million.

This stock-option shutout — for three of the four top-paid CFOs, mind you — is a real reversal of fortune from last year's report. The leading earner in that survey, Sun Microsystems' Michael Lehman, reeled in $36 million by exercising his options in 2001. Larry Carter, the recently retired CFO of Cisco Systems, cashed in to the tune of $29 million.

Notably, neither Lehman nor Carter earned a bonus in 2001, and both lacked big option paydays in 2002. Not surprisingly, both saw their TDC drop nearly 100 percent in this year's survey.

Black-Scholes, Muddy Water
Options, of course, still have their supporters, especially among executives at startups and technology companies.

At such outfits, the end of option grants would hurt rank-and-file employees more than it would senior executives, says Stephen Giusto, CFO of Resources Connection, a professional services firm. If employers start issuing restricted stock rather than options to regular workers, adds Giusto, they would get fewer shares and enjoy less upside potential in their compensation.

But if FASB does require corporations to expense stock-option grants, CFOs at all publicly traded companies will be charged with calculating the worth of those options. And given the current CFO skepticism about the Black-Scholes pricing model, many finance chiefs may advise their boards to dump options rather than risk submitting inaccurate financial statements.

"The first thing we have to do for shareholders is produce predictable financial results," asserts Bronson. "I have to be able to measure the expense, and if I can't do that...I have to do something else."

Finance chiefs themselves are also on the receiving end of grants — and like other employees who've seen the values of their once-promising options plunge underwater, they may have their doubts about Black-Scholes. Notes Oppermann: "People are saying, 'I don't think my options are worth the value you're putting on them.' "

Better Than CEOs
All of which may explain why many companies appear to be embracing more-tangible forms of payment. Our survey revealed that restricted stock, which holds at least some value even in a falling market, is making a comeback. Grants of restricted shares to CFOs grew by 8.1 percent in 2002 after falling 19.3 percent the year before.

And what about good old-fashioned raises? As a result of the sputtering economy, the tight labor market, and inflation, corporate strategists have sought to keep fixed costs low, says Oppermann. Unlike bonuses, which can vary from year to year according to corporate performance, executive salaries become a fixed cost once raises are awarded, he points out.

True enough, last year the median CFO salary rose a modest 5.2 percent, according to our survey. That's a little south of the 6.9 percent increase in 2001, the 6.1 percent in 2000, and the 6.3 percent in 1999.

But to keep things in perspective, take a look at salaries for the CEO. Mercer's Oppermann points out that last year, the median salary for chief executives barely moved the needle, rising just 2.2 percent. "CFOs are more in the spotlight" than CEOs, notes Oppermann, and they're "becoming more and more important" as a result of Sarbanes-Oxley.

In reality, CFOs remain some of best-compensated executives in the world. As our survey underscored, finance chiefs have managed to keep their pay levels up even as options are disappearing. "Let's face it," says Giusto, "I'm not going to miss any meals this year."

For the record, Giusto cashed no options last year; the Resources Connection CFO earned a salary of $270,000 and a bonus of $65,000.

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