Certainly, the numbers indicate that CFO compensation has taken a hit over the past year. Median total compensation increased by 4.6% in 2007 to $2.7 million, from $2.6 million in 2006, according to a study of more than 200 Fortune 500 CFOs in office for at least two years by Equilar, a Redwood Shores, Calif.-based executive compensation research firm. But, while base salaries increased by 6.8%, to $534,167, aggregate bonus compensation–which includes discretionary, annual performance-based, and multi-year performance-based bonuses–was another story altogether. It declined by 5.3% to a median of $600,000. The chief driver of that decline was in annual performance-based bonuses, which were down 8.2%. "For finance chiefs, like other executives, this has been a turbulent year on the compensation front," says Alexander Cwirko-Godycki, research manager at Equilar. "Overall pay levels are climbing at a slower rate than past years, and bonus compensation appears to be down."

That's in stark contrast to previous years, when increases in performance-based compensation contributed to higher pay
levels for treasurers and controllers, as well as CFOs. Between 2004 and 2007, base salaries of CFOs rose by an annual rate of 2.3%, to $385,000, while total compensation for the group, including short-term annual incentives, rose by 7.1% to $630,000, according to a survey of approximately 100 companies with annual sales of $1 billion to $5 billion by New York-based benefits consulting firm Mercer. The base salaries of treasurers rose 3.6% to $194,400, and 4.9% for their total pay packages, to $257,900, while salaries of controllers jumped 10.3%, to $210,000 and 14.8% for total compensation, to $275,300. It's unlikely, however, that the current declines in performance-based compensation are mainly the result of the new disclosure rules or fear over shareholder reaction.

Company performance is the more likely driver. "Disclosure rules are, not in and of themselves, going to change the actual level of compensation for CFOs or other executives," says Russell Boyle, a consultant with Egon Zehnder International, a Zurich-based executive search firm. In fact, in a few notable instances, companies in troubled industries have taken steps to make sure their top executives, including CFOs, were able to receive their bonuses despite their poor performance. In February, for example, despite a $1.9 billion loss for the fourth quarter of 2007 from subprime loans, Washington Mutual decided that it would exclude those losses when calculating executives' bonuses. Indeed, compensation experts figure the new disclosure rules will more likely force companies to explain their compensation levels than lower them. "The makeup of compensation might change, but I think they'll just move the money to a different area," says Paul Hodgson, a senior research associate at the Corporate Library, a governance research group.

For CFOs at least, that's partly due to turnover fears. Many boards think if they change their performance goals in a way that reduces CFO pay, executives will leave for greener pastures. It's not an unfounded suspicion, since the average CFO tenure is only about four years. In fact, Kevin Connelly, chairman of New York-based executive search firm Spencer Stuart, predicts that CFO turnover will pick up this year, as executives in hard-hit industries experience decreased bonuses or leave when the CEO departs.

But pressure to retain CFOs puts boards in a tough position. The reason: More transparency is likely to inspire stepped-up shareholder ire this year and, most probably, even more the year after, if the economy continues to spiral downward. "I think this year's going to be a protest-full year," says Hodgson. "With all the new information out there, when companies do something that isn't the best practice, it becomes obvious to shareholders more quickly."

Quite simply, shareholders will see detailed descriptions of compensation formulas, making the fact of excessive pay levels even more visible, at a time when the market is in a downturn. Hall points to financial services companies as an illustration. "Shareholders are going to go ballistic when they see these big write downs at the same time that senior executives are getting big pay packages," he says. The situation is especially tricky, since, in many cases, there will be a disconnect between company performance during the period of time covered by the proxy statement and the current environment.

It's a delicate balancing act. Hall cites one client as a typical example. The company is still struggling with how to compensate its named top executives, whose stock options are under water, without doing something likely to cause a ruckus among shareholders once it's disclosed. "We're trying to figure out how do we help dig them out and still retain them," he says. The answer in many cases, according to Hall, will be for more companies to put into effect long-term incentive programs likely to entice CFOs and other executives to stick around–say, introducing a program that pays out cash or stock, based on achieving goals over perhaps a three-year-period. "With tough times likely ahead, companies are increasingly focused on retaining key executive talent," says Cwirko-Godycki. "As a result, we'll see equity awards with service-based vesting requirements, which promote long-term growth and retention, on the rise."

The area in which experts expect to see the biggest immediate change is in pensions, termination agreements and other perks that typically anger shareholders. "The effect of having to spell things out will only increase their visibility," says Paula Todd, managing principal at human resources consulting firm Towers Perrin. She sees a decrease in such practices as tax gross-ups or accelerated vesting of stock options. Severance packages may change from two to one times pay after five years, according to Steven Van Putten, eastern region practice leader of Watson Wyatt Worldwide's executive compensation consulting practice. "When companies find they can't defend their practices, I'm expecting them to terminate them," adds the Corporate Library's Hodgson.

Compliance with the new rules has been anything but uniform. While many companies are cooperating, it's not at all clear that their numbers are great enough to make much of a dent in overall practices, at least not yet. On the one hand, more companies played ball this year than last, when many firms chose not to comply. In many cases, they cited a loophole in the rules that companies don't have to disclose compensation information if it means revealing competitive secrets. This year, according to a study of 75 large, publicly traded companies by Watson Wyatt, 68% disclosed the goals on which they based rewards, up from 54% the year before. About 57% included goals for long-term incentive plans, vs. 45% in 2006. That still leaves a great many companies that chose not to comply with the disclosure rules. And, according to some observers, a large number that did so provided cumbersome, difficult-to-follow discussions. That's despite the more than 300 letters the SEC mailed after last year's disclosures, asking, among other things, that companies write in "plain English." In many instances, disclosures have included lengthy technical discussions that Charles Elson, Edgar S. Woolard Jr., chair in corporate governance at the University of Delaware, describes as "boiler plate." "You get disclosures that meet the legal requirement, but make it difficult for anyone to understand," he says. While that partially may be to avoid liability, Alexandra Higgins, a research associate with the Corporate Library says, "It's fairly easy to obscure information if you make it complex enough."

Ultimately, some observers also fear the disclosure rules will have unintended consequences. Companies that don't want to disclose their pay targets, for fear of giving away the store to competitors, may start moving more compensation into the discretionary bonus category. They aren't linked to performance and companies don't have to spell out the targets that need to be reached in order to earn them. "They'll avoid having to show the world their performance goals," says Russell Miller, managing director of Executive Compensation Advisors, a New York-based executive compensation consulting firm. He points to one client who was reluctant to reveal targets because the company's internal goals were generally higher than the targets they revealed publicly. "They tell the analysts they have certain goals that are highly achievable but, internally, they use stretch goals," says Miller. "They don't want to see a situation in which, if they fall short of those stretch goals, shareholders will be disappointed."

There's even concern that more disclosure will put upward pressure on compensation packages. "When the numbers are laid out for everyone to see, it's easier to use that as a benchmark and claim you need higher pay in order to be competitive," says Carol Bowie, head of the governance research service of RiskMetrics, a New York-based risk management and corporate governance research firm. She points to the change in disclosure rules for CEOs that went into effect in the early 1990′s, a move that contributed to higher CEO pay. The same thing could happen with CFOs, she says. The bottom line: While transparency might mean changes in the composition of pay, CFOs can probably look forward to respectable increases in total compensation for quite a while to come.