CFOs rank among the highest-paid employees in the United States. Their responsibilities require them to lead the financial arm of a company’s operations and sometimes other departments. The compensation for a successful CFOs varies widely and depends on several different factors.
There are three types of compensation that may be included in a CFO’s salary and benefits package:
Here’s a closer look at each of these types of CFO compensation.
The base salary is the regular wage that the CFO earns each pay period. Base salary is usually the tip of the iceberg for a CFO. This is the amount they collect regardless of the company’s performance.
A CFO’s base salary can vary widely depending on:
Option grants are given to CFOs of public companies that provide them with certain stock incentives. Any option grants given will include strike prices and expiration dates that the CFO must abide by to exercise them. If a stock price goes up, CFOs can take advantage of their options and sell shares to reap the benefits.
Stock options are intended to incentivize CFOs to drive shareholder value, leading to a theoretical increase in share price. However, the reality does not always play out that way. A company’s share price is driven by other factors that the business can’t always control, such as inflation or high-interest rates.
Long-term incentive plans include bonuses for reaching specific company goals. The incentive is usually a cash bonus. Incentive plans may be established:
A solid incentive plan can help companies retain their executive leadership team and ensure that CFOs align their work with the company’s overarching goals.
While retirement packages are declining across corporate America, some companies continue to offer them. Long-term health insurance is the most common retirement perk a CFO will encounter.
However, some corporations have pension plans that can be accessed upon retirement age. The availability of a future pension plan is a strong incentive for CFOs to remain in their position until they become fully eligible for retirement benefits.
According to Salary.com, the average CFO base salary is $414,300. The highest-paid CFOs earn up to $634,001, and the lowest-paid receive $224,593. Of course, location plays a significant role. CFOs based in smaller towns and rural areas will typically fall on the lower end of the scale, while a CFO in New York may earn much more.
CFOs who work for private companies can earn much less than their public company counterparts. While the CFO of a private company may have very similar responsibilities, there may be fewer employees or less revenue to oversee.
Keep in mind that larger companies tend to base themselves in big cities. Numerous Fortune 500 companies are located in Silicon Valley, New York, Chicago, and Atlanta. Aside from the higher cost of living in these locations, Fortune 500 companies can afford to pay their executives more than smaller companies.
A company that doesn’t generate much revenue won’t be able to pay its CFOs as much as companies with higher sales. Thus, CFOs working for companies with less than $50 million can expect a smaller salary than those at more established businesses.
Start-up companies with reduced revenue often find that they don’t need the services of a full-time CFO. They may choose to hire a part-time or virtual CFO in this case.
A part-time or virtual CFO will be able to provide guidance and insight to a growing company, but they won’t be on board full-time or even every day. They can be asked for input on a flexible basis or when needed.
CFOs often have a wide breadth of educational and working experience to draw from. Most have an MBA or other form of master’s degree in finance or accounting, with certifications such as a CPA or CFA.
A CFO oversees a wide variety of team members, including the FP&A, accounting, audit, and HR departments. Thus, the broader their experience, the better.
Rather than sticking with one track in their careers, it’s wise for future CFOs to garner experience in various financial areas. For example, they may choose to work as a controller, director of FP&A, and tax manager. Each position gives them better insight into the workings of a business.
Outside of their work and educational experience, a CFO will need soft skills, including (but not limited to):
The CFO is expected to drive the company’s operations, so they’ll need to establish key metrics that they can track to observe any performance changes.
Metrics can help management understand and anticipate problems within the company, such as falling cash flow or delayed collections. A CFO can recommend strategic actions to remedy the issues based on the metrics.
A CFO is expected to be the driver and overseer of crucial parts of the organization, including finance, accounting, tax, and human resources. Their salary and benefits package will vary depending on factors such as location, size of the company, and annual revenues. Public company CFOs generally make more and obtain a more comprehensive benefits package than private company CFOs.
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