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Losing Altitude In A Stiff Wind

CFO compensation is deflating as companies cut option grants and try to avoid investor outrage. But hikes in other forms of pay are easing the pain

By John Labate | Updated on May 01, 2004

Handkerchiefs, please. Last year may have been a winner for the stock market, Arnold Schwarzenegger and the Florida Marlins, but for CFOs and other top finance executives, it was a year of diminishing returns. Total compensation for CFOs–including salary, bonus, stock and options–fell 4.2% in 2003 from the prior year, according to the annual pay survey by Pearl Meyer & Partners, the New York-based compensation consulting firm. That came on top of the 1% fall recorded for 2002, which was the first decrease for finance executives in a decade. And there was plenty of pain to go around: Total payouts to treasurers in 2003 were down more than 6%, and controllers lost a bit as well.

The biggest drag on compensation payouts for the year is an easy guess: Stock options, thanks to the decision by U.S. and European regulators to require expensing, will no longer be a cheap technique to exponentially enhance executive take-home. For the 41 CFOs sampled by Pearl Meyer, the annual contribution from stock options tumbled a steep 26%, as many companies apparently decided to get a jump on the widely expected ruling on expensing by the Financial Accounting Standards Board (FASB), which was finally issued on March 31.

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