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CFOs weigh in on executive compensation.
Don Durfee, CFO Magazine
May 8, 2006
This year's proxy season prompted the usual complaint about CEO pay: it's way too high. But finance executives don't see it that way.
In a survey of more than 100 finance executives at the March CFO Rising conference, only 34 percent said that their bosses are overpaid. In fact, one quarter think their CEOs earn too little and another 43 percent say the compensation hits the mark.
Of course, finance executives may not be the most impartial judges. Many think that the issue isn't CEO compensation per se as much as the discrepancy in pay between the CEO and — you guessed it — the CFO. Fifty-three percent think the disparity between CEO and CFO pay fails to reflect the relative value created by each executive. The gap, which averages 2.7-to-1, ran as high as 10-to-1 at some companies surveyed.
One reason some finance chiefs believe they deserve more credit, and therefore more of the spoils, is that their CEOs lack financial expertise. Nearly half of respondents say that their CEO knows less about finance than he or she should.
Ignorance isn't bliss. One-fifth of CFOs say that their bosses still lean on them from time to time to "make the numbers work." That marks an improvement from two years ago, when 47 percent said they had felt such pressure, but the number remains surprisingly high.
This problem isn't limited to public companies panicking over analysts' earnings targets. On the contrary: only 11 percent of public company CFOs say they feel that pressure, compared with 23 percent of private-company executives. For this particular gap, public-company CFOs may have Sarbanes-Oxley to thank. For all of the hard times and long hours engendered by Sarbox, it does seem to have tempered the imprudent impulses of CEOs.