CEO Compensation Gap: C-Suite Roles Out-earning CEOs

by / ⠀Blog / August 2, 2023
CEO Compensation Gap: C-Suite Roles Outearning CEOs
The role of CEO has traditionally been seen as the pinnacle of success, accompanied by hefty paychecks and prestige. However, a shift is occurring in corporate leadership dynamics, with C-suite executives like CFOs, CHROs, and general counsels now out-earning CEOs in terms of compensation. This changing landscape is driven by several factors, including the increasing power of employees, the growing politicization of corporate leadership, and the narrowing pay gap within the C-suite. In this article, we will explore the reasons behind this trend and its implications for aspiring executives.
The Changing Role of CEOsThe role of CEOs has become more challenging in recent years as employees assert their power and demand greater transparency and accountability from corporate leaders. Companies like Alphabet and Delta have witnessed employee protests against layoffs and controversial contracts, signaling a shift in the balance of power within organizations. CEOs are also facing increased scrutiny and the need to navigate complex political landscapes, as exemplified by the experiences of Ed Bastian at Delta, Bob Chapek at Disney, and Marc Benioff at Salesforce.The Rise of C-suite CompensationWhile CEOs have traditionally enjoyed substantial pay packages, the compensation of other C-suite executives has been catching up rapidly. According to a Fortune analysis, the pay of CFOs, CHROs, and general counsels in America’s largest companies has increased at an even higher rate than that of CEOs. This trend is driven by multiple factors, including the de-stigmatization of job-hopping, the need to retain top talent through stock grants, and the expanding responsibilities of C-suite roles.

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Compensation Catch-UpA review of compensation data for CEOs and other C-suite executives at S&P 500 companies reveals a significant increase in the pay of CFOs relative to CEOs. For example, at Ford Motor Co., the CFO’s pay rose from 25% of the CEO’s pay in 2012 to 43% in 2022. A similar pattern can be observed at CVS Health, where the CFO’s pay increased from 30% to 69% of the CEO’s pay during the same period. This trend is not limited to CFOs alone; general counsels have also experienced substantial pay increases, with their compensation almost doubling as a percentage of the CEO’s pay.

Job Hopping and Less ScrutinyOne of the main drivers behind the rising compensation of C-suite executives is the de-stigmatization of job-hopping. In the past, frequent job changes were frowned upon, but now it has become the norm, providing executives with opportunities to negotiate higher pay. Companies are increasingly offering large grants of company stock that vest over several years to retain valued C-suite talent. Additionally, the expanding responsibilities of C-suite roles, such as CFOs taking on operations reporting, have contributed to their increased compensation.

Another factor contributing to rising pay within the C-suite is the relative lack of public scrutiny compared to CEOs. While CEO pay often attracts attention and criticism, the compensation of other C-suite members often goes unnoticed. This allows companies to offer higher pay packages without facing significant backlash. The desire to avoid controversies and threats that CEOs frequently face may also attract talented individuals to C-suite positions rather than pursuing the top job.

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Implications for Aspiring ExecutivesThe changing dynamics of CEO compensation and the rise of C-suite roles have important implications for aspiring executives. The traditional allure of the CEO position, with its staggering pay and prestige, is no longer as attractive as it once was. As the pay gap within the C-suite narrows, ambitious individuals may find better opportunities for career growth and financial rewards in other executive roles. Moreover, the increasing power of employees and the politicization of corporate leadership may deter some from pursuing the CEO position, with its higher level of scrutiny and potential controversies.

ConclusionThe landscape of CEO compensation is undergoing a significant transformation, with C-suite executives now outearning CEOs in many cases. This shift is driven by factors such as employee empowerment, increased politicization of corporate leadership, and the catch-up in compensation for other C-suite roles. Aspiring executives should consider the changing dynamics and carefully weigh the benefits and challenges of pursuing the CEO position. The path to success and financial rewards may no longer be solely focused on reaching the top of the corporate ladder but instead exploring the expanding opportunities within the C-suite.

Remember, the CEO role is just one piece of the puzzle in building a successful and rewarding career in the corporate world. By considering the changing landscape of executive compensation and the opportunities within the C-suite, ambitious individuals can make informed decisions about their career paths and strive for success in roles that offer both financial rewards and personal fulfillment.

FAQ

Q: Are CEOs still the highest-paid executives in most companies?

A: While CEOs have traditionally been the highest-paid executives, the compensation of other C-suite roles, such as CFOs and general counsels, has been catching up rapidly. In some cases, these roles now outearn CEOs in terms of total compensation.

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Q: What factors have contributed to the rise of C-suite compensation?

A: The rise of C-suite compensation can be attributed to several factors, including the de-stigmatization of job-hopping, the need to retain top talent through stock grants, and the expanding responsibilities of C-suite roles.

Q: Is the CEO position losing its appeal due to the changing dynamics of executive compensation?

A: The CEO position is still highly coveted, but the changing dynamics of executive compensation have made other C-suite roles more attractive to ambitious individuals. The narrowing pay gap within the C-suite and the challenges and scrutiny associated with the CEO position may lead some aspiring executives to explore alternative career paths.

Q: How should aspiring executives navigate the changing landscape of executive compensation?

A: Aspiring executives should carefully consider the opportunities and challenges within the C-suite and weigh them against the allure of the CEO position. By staying informed about industry trends, focusing on personal growth, and seeking out roles that offer both financial rewards and personal fulfillment, aspiring executives can make strategic career decisions and achieve success in the evolving corporate landscape.

First reported on Fortune

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Joe Rothwell
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