Job Hunting

It’s Good to Be King

The growing power and pay of top CIOs looms as a source of irritation for CFOs.
David KatzJune 5, 2002

The view from the top can sometimes be distorting.

A CFO glancing at the bright pay and job prospects of top chief information officers, for instance, would get nary a hint that the dot-com bubble had burst.

To look at the burgeoning compensation packages of CIOs and chief technology officers, you’d also never guess that the U.S. economy lost 500,000 tech jobs last year or that, according to one study, the average salary paid to IT workers at the vice president level or below dropped by 5.5 percent.

To be sure, the highly incentivized pay structures of CIOs vary wildly by industry and company size, making it hard to trace pay trends. But consultants concede that overall, senior tech execs are getting pay increases of about 5 percent — roughly level with what raises were a year ago.

But at many companies, the ruling techies are doing much better than that. “The top CIOs are probably making 10 to 15 percent more than they were making a year ago,” says Mark Polansky a managing director in the IT practice of Korn/Ferry International in New York City. The raises given in the late nineties “are still there.”

What’s more, the downturn seems to be having a reverse effect. “My top clients looking for top CIO talent are not telling me, ‘Let’s pay them less because times are tough,’” says the headhunter. Instead, employers are more focused on finding the right IT brains to help them get products to market faster and keep profit margins competitive. Adds Polansky: “The pressure on the marketplace for good CIOs has actually heightened — and that’s carrying salaries upward.”

The only tech chiefs who may not be doing so well are the fossils of an era when IT was more a maintenance function than a potential profit-making engine. Not that there was anything wrong with that. Those quaint management information system (MIS) directors “balanced the books and got the checks out on time,” Polansky says. But such a tech manager tends to be a “business-process enabler” rather than a “business-process driver” — and thus out of step with the times.

Still, it’s the old-style MIS directors who tend to report to finance chiefs, Polansky notes. If those reporting relationships are indeed fading, CFOs may be facing a loss of authority that could hinder their efforts to keep tech systems budgets and payrolls in line.

Add the flashy salaries of the new-style CIOs, and you could have some real tensions brewing between finance and tech. “A CIO who needs CFO approval is less of a factor when looking for top talent,” says Diane Tunick Morello, a vice president with Gartner Research in Stamford, Connecticut. “If you’re the CIO and you’re struggling every step of the way…to justify productivity, that’s a losing battle.”

Bonus Bonanzas

In line with their growing links to company productivity, CIOs are amassing the capacity to earn big bonuses. In a survey of 249 organizations with annual sales of at least $500 million, conducted by Foote Partners, an IT workforce research firm and management consultancy located in New Canaan, Connecticut, the average cash bonus for the top IT executive in the first quarter of this year ranged from 40 percent at the 25th percentile to 70 percent at the 75th. Base salaries ranged from an average of $87,000 to $420,000 at those percentiles.

CIO bonuses at smaller companies seem a tad less stratospheric. In a survey of 367 employers with below $500 million in sales, Foote Partners found that the average bonus of the top tech officer ranged from 44 percent at the 25th percentile to 49 percent at the 75th percentile. Average base salaries ranged from $84,000 to $560,000 at those percentiles.

But it all depends on the industry. David Foote, president and chief research officer at Foote Partners, says he knows of a derivatives company that pays its top tech executive a whopping $1.13 million bonus on top of a relatively meager $170,000 salary — and had trouble recruiting a CIO because of the low salary figure.

Not unexpectedly, transportation companies and telecoms, with their huge hoards of data, are likely to supply tech chiefs with scads of variable pay. The average bonus for a CIO working for a travel giant is currently running at $206,000, according to a Towers Perrin survey of 16 companies averaging $15.1 billion in sales. The average salary for the group is $280,000.

CIOs working for telecommunications companies are averaging bonuses of $182,000 and base salaries of $272,000, according to research based on 11 companies averaging $7.2 billion in sales. Other industries studied by the New York City-based consulting firm:

  • Computers. At 27 companies averaging $8.1 billion in sales, CIO bonuses averaged $177,000, salaries $272,000.
  • Pharmaceuticals. At 15 companies averaging $10.9 million in sales, CIO bonuses averaged $172,000, salaries $339,000.
  • Food, beverage, tobacco. At 16 companies averaging $2.4 billion in sales, CIO bonuses averaged $101,000, salaries $226,000.
  • Chemicals. At 16 companies averaging $3.6 billion in sales, CIO bonuses averaged $94,000, salaries $229,000.