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CFO Comp: Down, Not Out

For some, total compensation down last year; newly hired CFOs seeing big boost in pay, however. Plus: survey reveals finance chiefs' biggest challenge. And: Census Bureau says women still making less than men.
Stephen Taub, | US
March 25, 2003

It was a tough year for James Stewart.

The Cigna CFO saw his total compensation package plunge by more than 68 percent in 2002.

Nevertheless, the insurer's finance chief still pulled down a total pay package of more than $5.1 million last year.

Stewart earned more than $1.1 million in salary and bonus and enjoyed gains of $4 million or so from exercising stock options.

In 2001, however, he hauled in more than $16 million.

That included more than $2.8 million in restricted stock and $2.4 million in long-term incentive payouts.

He also recorded gains exceeding $9.4 million from exercising stock options in 2001.

Meanwhile, Apple Computer CFO Fred Anderson cashed in options that resulted in gains of more than $10.1 million. His salary, however, was $656,631. Anderson did not receive a bonus last year.

Other 2002 CFO compensation:

These figures (taken from proxy statements) seem to jibe with CFO's most recent compensation survey. According to that survey, conducted by Mercer Human Resource Consulting, total CFO cash compensation (salary and paid bonuses) stayed flat in 2002, averaging $432,400.

The lack of growth -- a sharp contrast with the 9.6 percent increase the previous year -- was attributed to frozen salaries and lower or unpaid bonuses, even as other finance functions saw their pay go up.

(To read CFO's 2002 compensation survey, "Facing the Bear," click here.)

Interestingly, newly hired CFOs appear to be seeing an increase in their compensation. According to a survey of executive pay conducted in September by executive-recruiting firm Christian & Timbers, compensation for newly hired finance chiefs actually rose four percent in the first half of 2002.

The Christian & Timbers survey did reveal a 13-percent dip in bonuses -- but that was the smallest bonus decrease for all executive positions surveyed. And CFOs blew other execs out of the water in base salaries, with a 12 percent jump up. Conversely, base salaries for all other positions (except COO) decreased anywhere from three percent (VP of sales) to 21 percent (CIO, VP of marketing). COO salaries increased by five percent.

Average annual compensation packages (including salary and bonuses) for newly hired finance chiefs rose from $272,250 in the first half of 2001 to $282,015 in the first half of 2002.

CFOs Top Challenge? Uncle Sam
Finance chiefs may be making less money, but they're facing increasing business challenges. What is the biggest business challenge facing chief financial officers over the next 12 months?

Government regulation, according to a recent survey of 1,400 CFOs conducted by Robert Half International Inc.

In the survey, 20 percent of the respondents cited government regulation as their top concern. That was followed closely by maintaining adequate sales/financing (19 percent), competition (18 percent) and finding qualified staff (17 percent).

In a similar survey conducted three years ago, finding qualified staff (27 percent) and maintaining growth (22 percent) were the leading priorities.

At the time of that survey, the tech/Internet boom had created a labor shortage, and most CFOs were desperately trying to figure out how to find top-notch employees.

Things are slightly different these days. Rounding out this year's list of top CFO challenges: meeting customer demands (12 percent), followed by "other," mentioned by 8 percent of the respondents.

"In the wake of corporate scandals and amid a weakened economy, CFOs are facing a variety of interrelated issues," said Max Messmer, chairman and CEO of Robert Half International Inc.. "Financial executives must provide strategic insight on day-to-day business matters, develop action plans for complying with new regulatory requirements and ensure their firms maintain a competitive edge."

While Messmer granted that today's unemployment rate is higher than three years ago, he said finding qualified professionals remains a real concern of CFOs. "Recruiting and retaining top talent is critical in any economic environment," he added.

UnumProvident to Restate Results
UnumProvident Corp. reported it will restate earnings for the past three years by $29.1 million, as part of a deal with the Securities and Exchange Commission.

The largest U.S. disability insurer said the change in its reported results involves the value of certain securities viewed as "other than temporarily impaired."

The company's management said during 2000 and 2001, it reported those losses using factors other than its quoted market price. After discussions with the SEC, the company announced it is restating its financial statements for 2001 and 2000 to eliminate these "non-market" adjustments.

Many of these adjustments reversed during 2002 because additional "other than temporary impairments" were recorded on these securities, using quoted market prices, or the securities were sold, the company added.

"This is an extremely important step for our company," said Tom Watjen, UnumProvident's vice chairman and chief operating officer, in a statement. "This has been a very long process, but we are pleased to resolve this in a manner that has not impacted our stockholders' equity. We hope that the SEC will clear our shelf registration within a couple of weeks of our 10-K filing, which we believe will position us to proceed promptly with our capital raising plan."

US Tech's CEO Charged With Fraud
US Technologies CEO C. Gregory Earls was charged Monday with multiple counts of securities, mail and wire fraud, according to the Associated Press.

Earls was accused of stashing some of the $15 million entrusted to him by investors into a trust fund for his children, the wire service reported.

The accounting troubles at the otherwise obscure company were abruptly thrust into the spotlight last year when former FBI head William Webster, a one-time U.S. Technologies director, was forced to resign as head of the new Public Company Accounting Oversight Board.

Reportedly, while heading US Technologies' auditing committee, Webster had fired the company's outside auditors.

The controversy eventually led then-SEC Chairman Harvey Pitt to resign last November.

According to the AP's account of the indictment, Earls is alleged to have controlled an investment company called USV Partners, claiming he would use investors' money to buy shares of US Technologies. Instead, he allegedly used it for the trust fund and to repay investors from other business ventures

Earls is also accused of stealing $1.3 million from investors, claiming he would finance an Internet company but kept the money instead.

"Innocent investors entrusted tens of thousands of dollars to Earls," Manhattan US Attorney James Comey reportedly said. "The indictment alleges Earls repaid that trust with a naked theft of investors' money."

Glass Ceiling Still Solid
The more things change in the workforce, some things stay the same.

Turns out women are still likely to earn less than men, are less likely to reach the highest pay brackets, and are more prone to live a life of poverty.

This is the conclusion of a survey conducted in March 2002 by the Census Bureau and is being released to coincide with Women's History Month.

Nearly 16 percent of men age 15 and older who worked full-time in 2001 earned at least $75,000 a year, compared with 6 percent of women, according to the report.

About 20 percent of men earned between $50,000 and $75,000, compared to 12 percent of women.

In addition, women are much more likely than men to be doomed to a life of poverty, especially when they get older. For example, 12 percent of women age 65 and older lived in poverty, compared to 7 percent of men.

Even so, earning levels for women are at record highs, with those holding college diplomas especially benefiting, according to a different Census Bureau report last week. The number of women with at least a bachelor's degree is also at a record high.

The Census Bureau also found that some 9.4 million women worked in executive or managerial positions -- 45 percent of such jobs in 2002. Women held the majority of the jobs in the field of technical or related support services.

According to the survey, nearly one-quarter of the 63.6 million working women in 2002 worked in administrative or clerical positions, larger than any other field.