Behind the soaring salaries of chief financial officers 

Rapidly rising wages for finance chiefs has demonstrated their growing importance within the C-suite and the increasingly demanding nature of the job

As employees seek pay rises, are their actions pushing up inflation?

Chief financial officers are having a good payday. Research by recruitment firm Robert Walters shows CFO wages have risen substantially in the UK over the last twelve months. In London, earnings increased by £50,000 in 2024 to between £190,000 and £300,000; an upward trend that can be seen across the country.

Sizable salaries are to be expected for the top jobs, but especially high outliers can spark indignation from shareholders and the general public alike. This time it is Jason Windsor, CFO of UK asset manager Abrdn, in the firing line. His salary of £675,000 has drawn criticism for being “too high”. It is 25% more than his predecessor and double that of the average FTSE 250 CFO, according to data by recruitment firm Page Executive. 

Mark Freebairn is head of CFO practice at executive recruitment firm Odgers Berndtson. He says pay increases should always be explained in the context of the business and delivery of strategy, regardless of role. Nevertheless, a “surge in demand for highly skilled CFOs” and a “lack of debate” around how pay packages are decided between shareholders and the board is leading to unprecedented salaries being offered to finance directors. 

CFO wages are increasing

Everybody wants a piece of the CFO – and they’re more than willing to pay for it. In 2023, CFOs came top of a list of the highest-paid jobs compiled by The Times’ Money Mentor. 

“The CFO role has always been a well-paid position, but there’s no doubt wages are increasing,” remarks Steve Sully, regional director at financial recruitment firm Robert Half. The fact that even CFOs with limited experience can expect a minimum starting salary of around £125,000, according to Sully, is a clear indicator of the level of demand and future direction of travel.

There are even cases of senior finance chiefs outpacing CEOs on the salary front. The CFO of UK fintech Wise out-earned the chief executive last year by a cool £130,000. As did the CFO at luxury goods conglomerate Richemont, with 12.9m Swiss francs (£11.4m) in rewards last year.

Such instances are rare, Freebairn insists. But, he admits that the pay gap is becoming much tighter as the role of the CFO has “evolved and intensified” over the years. 

CFOs are in high demand and short supply

So what is behind the soaring salaries? For one thing, a capable finance chief is a huge asset, both in stabilising an organisation and accelerating its growth. At the same time, the broadening of their role within the business has meant “the pressure and responsibility on CFOs has amplified – and compensation has matched,” Freebarin explains.

“Finance chiefs have become a critical extension of the CEO”, he adds, which is why their value has grown in the eyes of the board and why they’re seen as the most capable successors. Indeed, 15% of current FTSE 100 chief executives stepped up directly from a CFO position last year, according to data from executive search firm Heidrick & Struggles. 

This, and the increasingly complex nature of the role, means seasoned finance chiefs have become both highly prized and harder to come by, says Lucy Bisset, one director at Robert Walters. She believes the dearth of expert CFOs, driven by the movement of more seasoned professionals out of the talent pool, is prompting businesses to stretch their salary budgets and bolster their benefits packages in a bid to attract and retain talented finance leaders.

Over the last 12 months, 20% of FTSE 100 CFOs left their jobs, compared with 13% in 2019, according to data from Russell Reynolds Associates.

Bisset says loyal finance chiefs who stayed to steer companies through the pandemic are now leaving their jobs, opting for early retirement, bigger salaries or stepping into the CEO role. “Many candidates are aware of their value in the market – with 15% of CFO candidates in the UK having moved positions in the last year – showing a clear confidence to move for more.”

New opportunities in private-equity-backed businesses are also contributing to the high rate of departure. CFOs are being lured in by the tantalising offer of “two days a week on £300,000 with three months’ holiday,” Freebairn explains. “For finance chiefs working six days a week and losing their life to a lack of sleep, that’s going to be a very tempting offer.” 

The trend poses a problem for companies without a succession plan in place for this critical role. The experience and skills of talented CFOs cannot be replaced by a quick hire, leading to increasingly large and more competitive pay packages being offered. 

Bridging the US pay gap

UK boards are also under pressure to match the salaries being offered to US peers. Freebairn has witnessed “nightmare situations” where boards are left scrambling to justify to members of the executive team why their US colleagues are being paid “four times as much for the exact same job.”

Indeed, CFOs at S&P 500 companies are paid an average of $4.7m (£3.8m) – compared with CFOs at FTSE 100 companies earning £575,000, according to Page Executive’s 2023 salary guide. 

In Freebairn’s view, this discrepancy is fuelling fear among businesses that they’ll start losing experienced leaders unless they start paying more. “That’s not to say CFOs are packing their bags and moving to the US, but they’re certainly thinking about it – and that’s the risk.” 

This is behind the recent spate of salary hikes for bosses at UK companies, including Smith & Nephew, London Stock Exchange Group and AstraZeneca. Despite attracting flak from shareholders who worry that pay trends are no longer sustainable, Freebairn says it is “the reality of competing on a global stage where one of the ways of keeping score is how much you are paid.”

Is higher pay an effective strategy? 

Logic dictates that bigger salaries attract top talent. And that the more qualified a candidate is, the better the performance of the business under their watch is likely to be. Some would also argue that the stress and personal sacrifice required to be an effective finance chief is further justification for higher pay. But it also means less profit for an organisation and could limit other hiring if money gets tight. 

Luke Hildyard is director of the High Pay Centre, a think-tank critical of excessive executive compensation packages. He is sceptical of arguments that justify lavish pay for senior managers. In practice, the link between higher executive pay and better business performance is “very weak”, he argues. In fact, he points out that some studies find the opposite is true: the more chief executives get paid, the worse their companies perform in the long term. While this is more relevant to the CEO, Hilyard believes the notion rings true across the entire C-suite. 

“There is also limited evidence, beyond individual anecdotes, of UK companies failing to attract or retain key executives because of low pay levels,” Hilyard says. A shortage of capable candidates should, in his view, prompt closer scrutiny of leadership training and development processes. 

Hilyard adds: “It’s no surprise that those campaigning the loudest for the removal of pay caps are usually the ones who stand to benefit the most from such a move.” 

Not only that, but research by People Management reveals that large pay gaps between executives and employees can have a negative impact on employee morale, engagement and productivity. This is even more true in tough economic times when sizeable pay packages feel out of touch with the financial reality for millions of ordinary people. In Hilyard’s view, this should be considered alongside any argument for higher pay.

How to attract and incentivise CFOs 

The furore around swelling pay packages is also leading to tricky questions about how to recruit for the CFO role in 2024. 

“It’s going to be difficult for businesses to continue to justify pay increases for the CFO role on the scale that we’ve seen in the last few years,” says Sully. Especially as leadership remuneration attracts increased scrutiny in the media and firms come under pressure from shareholders to maintain pay restraint. “The challenge for employers in this situation is how to strike the right balance of appropriate financial incentives, without negatively impacting recruitment and retention.”

There’s been a move to broader benefits packages that are more sustainable for budgets. “We’ve found that CFOs are demanding more from their employers, including allowances for working from home or fuel if a commute is required, access to flexible benefits programmes and even dental insurance,” Sully says. 

Above all, many finance chiefs are looking for jobs that prioritise their professional wellbeing, offer them flexibility and give them the chance to shape strategic decisions, argues Sara Daw. She is chief executive of The CFO Centre, a placement agency for part-time finance chiefs. Daw believes that the appeal of the traditional CFO role is fading, prompting talented professionals to rethink their careers, especially those feeling burnt out by the stresses of corporate life. “They are disillusioned with the long hours and being stuck in a bureaucratic chain of command. They want to be more involved in the sharp end of the business again – and get back to what they enjoy doing.” 

With salary expectations showing no signs of slowing down, it is more important than ever that employers are not only aware of the aspects driving CFOs away from the position but also how they can attract them back.

Three ways to incentivise CFOs beyond pay

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