CAP’s report examines compensation outcomes for Chief Financial Officers (CFOs) relative to Chief Executive Officers (CEOs). This analysis summarizes 2023 compensation actions among 132 companies with median revenue of $14.6 billion. Additional criteria used to develop the sample is included in the Appendix.

Base Salary

The median change in base salary in 2023 was 4.0% for CFOs, similar to last year’s 3.8% increase. For CEOs, the median salary change was 0%, well below last year’s 2.9% median increase

• Over 70% of CFOs and half of CEOs received base salary increases this past year. This is similar to 2022 when 75% of companies made salary increases for CFOs and 56% made increases for CEOs
• Among executives who received salary increases, the median increase was 5.0% for CFOs and 4.0% for CEOs. These increases were similar to the prior year’s increases (5.1% for CFOs and 4.7% for CEOs) and align with higher salary budgets that we saw emerge in the post-pandemic inflationary environment. However, we expect salary increases to level off as companies navigate the current labor market

Bonuses

Financial performance in 2023, based on revenue and operating income, was flat at median compared to 2022, and median actual bonus payouts were also flat for both CEOs and CFOs.

• The bonus payouts were mostly aligned with company performance during 2023. Companies whose operating income fell in 2023 paid bonuses 7% below 2022 levels for CFOs and 8% lower for CEOs, at median. Companies who improved operating income paid CFO bonuses 5% above 2022 bonuses and only 2% above for CEOs
• Median target bonus opportunities remained consistent for CEOs at 160% of salary and for CFOs at 100% of salary. 32% of CFOs and 27% of CEOs had an increase in target bonus for 2023

Long-Term Incentive (LTI)

LTI awards increased at a higher rate in 2023 than 2022, reflective of competitive pressures to deliver market competitive pay. LTI awards increased 11% for CFOs and 9% for CEOs (vs. 7% and 5% last year, respectively)

• LTI awards have increased 6% for both CFOs and CEOs annually, on average, between 2013 to 2023
• The increase in LTI awards in 2023 is not driven by special one-time awards, which we found very low prevalence of in our sample

Total Direct Compensation (TDC)

TDC increases in 2023 were largely driven by higher long-term incentive awards. TDC was up 8% for CFOs and 5% for CEOs

• CFO total compensation as a percentage of CEO total compensation remains at approximately 1/3 in 2023

LTI and Target Pay Mix

Performance-based equity plans continue to make up the majority (approximately 60%) of total LTI for CFOs and CEOs. This focus aligns with the emphasis on performance-based pay that is consistent with the compensation philosophies of most organizations.

• The emphasis on variable over fixed pay, and performance-based equity over time-based equity continues
• CFO pay consists of approximately 60% long-term incentives (70% for CEOs) and nearly 95% of companies grant performance-based equity (which includes performance-based restricted stock and performance shares)

Turnover/Tenure

CFO turnover is higher than CEO turnover. In 2023, median CEO tenure is 7 years versus 5 years for CFOs.

Salaries

In 2023, 72% of CFOs and 50% of CEOs received salary increases (75% of CFOs and 56% of CEOs received increases in 2022). Though increases were flat for CEOs at median (compared to 2.9% last year), they remained at 4.0% for CFOs. This aligns with higher salary budgets in the last two years. Among companies that gave an increase, CFO median increase was 5% and CEO was 4%.

2023 Salary Increases

Changes in Actual Pay Levels

Actual bonus payouts in 2023 were flat when compared to 2022 and were directionally aligned with flat financial performance at median. Total direct compensation increased for both CEOs and CFOs (5% for CEOs and 8% for CFOs) driven by higher increases in long-term incentive award values.

Overall, revenue and operating income performance was flat compared to the prior year, and Total Shareholder Return (TSR) was +17% for 2023. Median actual bonuses as a percentage of target were 122% for CFOs and 117% for CEOs in 2023, almost identical to 2022. Most companies are still paying above-target bonuses, but less so than two years ago when companies had blockbuster performance.

Bonus payouts were generally aligned with performance outcomes for most companies. For companies with lower operating income in 2023, bonus payouts were down 7% at median for CFOs and 8% for CEOs, compared to median 5% increase for CFOs and 2% for CEOs at companies with operating income growth.

Median Total Cash Compensation Increases by Industry [1]

Median change in bonus varied by industry. In 2023, the difference in bonus change for CEOs and CFOs was generally within 10%, except for companies in the Energy and Materials industries.

Target Pay Mix

The pay program structure for CEOs and CFOs has remained largely unchanged. CEOs continue to receive less in the form of salary and more in variable pay opportunities, especially LTI, than CFOs. Long-term incentives comprise approximately 60% of total compensation for CFOs and 70% for CEOs.

Target Bonuses

Median target bonus opportunities as a percentage of salary remained the same for CEOs at 160% of base salary and for CFOs at 100% of base salary. 32% of companies increased the target bonus opportunity for CFOs and 23% increased the target bonus opportunity for CEOs in 2023.

Target Bonus as a % of Base Salary

Long-Term Incentive (LTI) Vehicle Prevalence and Mix

The majority of companies (approximately 60%) deliver LTI using two different vehicles. 23% of companies in the sample use stock options, time-based stock awards, and performance plan awards, which reflects a continued slight decline in prevalence of companies granting three equity vehicles.

The portion of LTI delivered through performance shares, time-based shares and stock options remains relatively consistent.

Total Compensation for CFOs as a Percentage of CEOs

Over a 10-year period, CFO total compensation as a percentage of CEO total compensation has been approximately 1/3, ranging from 30% to 34% over this time frame.

Turnover/Tenure

In 2023, median tenure is 7 years for CEOs and 5 years for CFOs, showing that CFO turnover outpaces CEO turnover. This sample reflects higher overall tenure than S&P 500 companies, which has trended around 5 years for CEOs in recent years.

Conclusion

Paying for performance while retaining key executive talent continues to be a focus for Compensation Committees and senior management. 2023 was a flat financial performance year among the companies in our sample, with generally flat operating profit and revenue at median; 2023 TSR at median was up 17%. Actual bonus payouts are similar to last year, but still remain above target. Long-term incentives were up nearly 10%, resulting in moderate increases in actual total direct compensation. 2024 results have generally been positive based on reported earnings and continued all-time high records for the major US indices. Additionally, recession fears have begun to subside in 2024. We expect compensation outcomes for 2024 to be strong and overall increases to continue to be in the high single-digits. Compensation Committees will continue to spend significant amounts of time to balance compensation outcomes with performance, calibrate goal setting, and ensure talent retention and attraction.

Sample Screening Methodology

Based on the screening criteria below, we arrived at a sample of 132 public companies with median 2023 revenue of $14.6B.

Endnotes