If you’re a CFO or a wannabe with primarily an accounting background, you probably know you could make more money by adding an MBA to your educational mix. But here is something you may not know: you’ll earn substantially more only if the degree is from an elite school.

2013 MBA graduates of Toronto's McGill University

2013 MBA graduates of Montreal’s McGill University

Those are conclusions of a new academic study by Sudip Datta and his wife, Mai Iskandar-Datta, both finance professors at Detroit’s Wayne State University. They studied first-year compensation for 1,598 CFOs appointed to their posts between 1994 and 2007.

A goal of the research was to prove that “generalist” CFOs — defined as those with MBA degrees, based on the premise that the degree confers on its recipients a broader, strategic knowledge — can command higher compensation packages than “specialist” CFOs, defined as those with a professional accounting certification. While that may seem obvious, the authors claim their study, slated to be published this year by the Strategic Management Journal, is the first to prove the point.

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They were startled to find, however, that just having an MBA did not trigger premium compensation. Instead, it was getting a high-quality education, as defined by attending one of the top 25 MBA programs (as ranked in 2011 by U.S. News & World Report), that made the difference. “It was surprising that even someone with an MBA from another school doesn’t get higher compensation” than the average CFO, says Iskandar-Datta.

As partial explanation, the study report makes note of other research concluding that graduates of upper-echelon schools enjoy an advantage in their careers from having access to higher-quality social networks.

Overall, according to the Dattas’ research, CFOs from the elite MBA schools commanded on average a 16.9 percent pay premium over other finance chiefs — that is, those with MBAs from other schools, specialist accounting credentials or non-MBA graduate degrees.

The group of all CFOs with MBAs, regardless of school, earned 6.5 percent above average. But that statistic is misleading, according to Iskandar-Datta. First, this data set included the finance chiefs from the better schools as well as those from lesser ones. Second, the study controlled for a variety of other factors known to influence executive compensation, the most pronounced of which was whether a CFO was promoted from within or hired from outside. The latter group enjoyed a whopping 40-plus percent pay premium over the former, across all educational backgrounds.

After removing the influence of that variable from the calculations, the study’s authors found no statistically significant evidence of higher pay for those with MBAs from non-elite schools, but a 10.5 percent advantage for the elites. “The median total compensation of CFOs in the study was $1.31 million, so 10.5 percent of that comes to a good chunk of money,” says Iskandar-Datta.

Perhaps more interesting was the breakdown of compensation data into base salary and equity-based pay. The full group of CFOs with MBAs registered a 2.6 percent salary premium, compared to 5.8 percent for those from the top schools. But when it came to equity compensation, a gulf opened up. While there was no statistically significant advantage for the full group of CFOs, those from the elite schools pocketed 46.4 percent more equity value than other finance chiefs.

“The major contribution of our research is presenting numbers regarding how much of a premium elite strategic skills lead to,” Iskandar-Datta says. “Viewed this way, paying for an MBA from a great educational institution and putting in time to get the degree will be handsomely rewarded.”

Another factor that greatly influences CFO pay is, of course, company size. But, the research found, both large and small companies assign significantly greater value to elite MBA degrees. Other controlled-for factors included board-of-directors’ characteristics, such as a prevalence of “busy” board members (those serving on at least four boards), who may have little time to monitor executives’ performance; and company metrics like leverage, return on assets, stock returns and stock volatility.

While the study tracked pay for newly appointed CFOs only through 2007, if anything the advantage enjoyed by strategic finance chiefs has widened since then, Iskandar-Datta opines. “Everything I read in the financial press indicates that the CFO has become the right-hand person to the CEO. It started with Sarbanes-Oxley – the requirement for CFOs to sign public documents along with the CEO made them equal, in a way, and gave more prominence to the position.”

The Dattas are working on a “sequel” to the research, comparing CFOs with elite-school MBAs to other finance chiefs in terms of company performance during the two and a half years after a CFO’s appointment. “We’re finding that elite strategic CFOs do provide better performance and value,” Iskandar-Datta says.

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