Compensation continues to be a pivotal point in executive-level talent acquisition and retention. The implementation of salary transparency laws into labor markets has removed some stigma, but CFOs, like everyone else, are looking to get the best compensation packages for their work.
New data from Compensation Advisory Partners (CAP) shows that CEOs are making an effort to competitively compensate the financial leaders they have. Data shows, not only did 80% of finance officers receive compensation raises from their company in Q4 of 2022, but one-third of CFOs saw up to a 25% increase in total compensation to round out 2022.
Bonuses are Down, Equity is Up
Despite a majority of CFOs and CEOs receiving salary increases in 2022, total compensation structure fluctuated. According to findings, CFO bonuses decreased by 12% on average, alongside their CEO counterparts. Executive officers saw a slightly less decrease in bonuses, at 10%.
As the CFO turnover rate was at a five-year high to close out last year, it’s no surprise that many CFOs were given more equity in lieu of bonuses. More than half (56%) of CEOs and 50% of CFOs received increased equity compensation. A majority of CFOs saw changes in their equity packages, with only a fifth (20%) of both CFOs and CEOs receiving similar equity awards in 2022 as they did in 2021.
Although equity in compensation packages has gone up for CFOs, a CEO’s investment in their own company has also picked up the pace. CAP findings show over half (56%) of CFOs' compensation packages were made up of equity incentives, in comparison to two-thirds (66%) of compensation packages being equity for their CEO.
Poorly Compensated CFOs Will Leave
As CFOs prioritize compensation over non-monetary elements, such as company values, work environment, and diversity initiatives. As four in 10 executives said they’d quit their jobs in the new year back in Q4 of 2022, executives who provide value to their companies should expect both competitive and significant increases to their compensation year over year.
It’s not surprising CFO turnover is moderately high. Despite some shifts in equity and bonus compensation, over a third (35%) of CFOs saw a decrease in their annual compensation by over 5%. A similar amount (34%) of CEOs also saw decreases in their compensation of the same or higher amount. Both these figures are close to the 40% of executives who told the Workforce Institute they wanted to leave their positions.
Compensation Negotiation Matters
As a third of CFO candidates were reported to be in the role for the first time last year, younger executives will approach compensation much differently around both sides of the hiring process. Whether it’s in their own hiring process, or when they are building out their teams, compensation will be simplified and spoken about early in the hiring process. CFOs who are happy about their compensation and communication leading up to it are presumably more likely to bring that same approach when building out their teams.
Not only does this boost satisfaction for both hiring managers and candidates during the interview process, but it allows companies to weed out under and over-qualified applicants early on. As CFOs compete for good talent to build out their teams, particularly accountants, those who approach compensation with transparency and fairness will likely have a better chance of landing the best talent.