Human Capital & Careers

Pay Gap Widens Between Finance Execs, Rank and File

But the rate of salary increase in 2015 dipped slightly from the prior year, research finds.
David McCannJune 24, 2016
Pay Gap Widens Between Finance Execs, Rank and File

The gap between the pay of finance executives and rank-and-file workers widened once again in 2015, according to the annual compensation survey from Grant Thornton and the Financial Executives Research Foundation (FERF).

Among 363 respondents with titles including CFO, corporate controller, vice president of finance, director of finance/accounting, and chief accounting officer, the average base salary was up 4.0% from 2014.

A Better Way to Do Ecommerce

A Better Way to Do Ecommerce

Learn how Precision Medical leveraged OneWorld to cut the cost of billing in half and added $2.5M in annual revenue.

Various sources had estimated that the average salary bump for all workers last year would be 3.0% to 3.1%. “If I were a finance executive and got a 4% raise, I’d probably be happy about it, comparing it to what the overall labor market is doing,” says Tom Thompson, FERF’s research director.

Of course, that pay gap doesn’t even take into account the fact that CFOs, at least, earn more in non-salary compensation — bonuses and incentive awards — than they do in salary. For example, in 2015 the median total compensation — bonuses and incentive awards — for public-company finance chiefs was $639,000, only $309,000 of which was salary, according to the FERF/Grant Thornton survey. (See chart.)

16Jul_FERFA similar breakdown was evident for CFOs at privately held companies, where the corresponding figures were $406,000 and $208,000, even though most of them aren’t eligible for long-term cash or equity incentives.

CFOs not only outpaced the overall workforce in salary increase percentage, they did better than other finance executives, gaining 4.2% compared to the overall average of 4.0%.

The pay gap between top company executives, including CFOs, and other employees has been widening for years, notes Ken Cameron, director of compensation and benefits consulting at Grant Thornton. “We’re continuing to see that dichotomy,” he says, adding that the issue is sure to remain in the spotlight because of the CEO pay ratio rule scheduled to take effect in 2018 under the Dodd-Frank Act.

That rule will require publicly held companies to report the ratio between the CEO’s pay and that of their median-paid worker. Cameron is aboard the bandwagon of corporate compensation experts and other observers that are critical of the rule.

“It doesn’t accomplish anything,” he says. “Compare the CEO of a software company in Silicon Valley, where the average salary might be $80,000, to the CEO of a retailer or a company with a significant international [work force]. Those ratios are going to be completely useless as far as [assessing] the efficacy of the pay programs. The rule is very poorly designed.”

Meanwhile, not every data point was rosy for finance executives in the pay arena last year, as the rate of salary increase retracted from the 2014 level. Public-company executives’ average bump declined from 3.9% to 3.7%, while their private-company counterparts receded from 4.4% to 4.1%. The overall CFO salary increase last year, 4.2%, was down from 4.6% in 2014 but still well ahead of the 3.2% gain in 2013.

“The fixed piece of the overall compensation package is slowing a little bit,” says Cameron. “But organizations are relying on bonuses, equity, deferred compensation, and anything else they can to make sure they can attract and retain the right folks.”

Offers Thompson, “I still think finance executives are doing OK.”