Pay Up

With finance talent in high demand, companies are boosting compensation — and making some demands of their own.

“I’ve been recruiting CFOs for 30 years, and
have never seen so much demand in the mid-to-large-cap market as I have in the last 36 months,”
says Peter Crist, CEO of Crist Associates.

Silicon Valley firms are back in the hunt. “Funding dried up
after the dot-com crash, but the VCs are back,” says John Wilson,
CEO of JC Wilson Associates, which recruits finance executives
for the high-tech sector. “We’re getting CFO requests
from early-stage companies once again.”

One reason for the surging demand: many big firms hope to
upgrade their finance talent. As Fortune 1,000 companies get bigger
and more global, and investor pressure intensifies, companies
need a broader set of skills. The dwindling of the chief operating
officer post contributes, since CFOs often are asked to take on
many of the former COO’s duties. Indeed, Chazen’s wide-ranging
job description at Occidental is beginning to sound almost typical. In addition to being CFO, he runs Occidental’s chemical business
and its gas marketing operation, and oversees its power
plants, liquid-natural-gas facilities, and reservoir engineers.

Small firms are competing for specialized talent, too, mostly
among finance professionals who are CPAs. “There’s great skittishness
on the part of investors,” says Wilson, much of it reflecting
concerns about compliance if their firm goes public. “They want
someone who’s a proven public-company CFO,” he says.

Coaxing such executives into a new job has required some
hefty equity offers. “To get a CFO out of his or her seat, you have
to either have really substantial long-term incentives or you must
offer a big block of stock,” says Crist. “Compensation committees
aren’t wild about that, but they don’t have much choice.”

Today, that stock rarely comes in the form of equity alone. Instead, many companies pass out restricted stock as well. The
move away from options isn’t new, of course; it began after the
dot-com crash pushed many options programs underwater and
investors noted the role of options in high-profile accounting
scandals. FAS 123R, which requires options expensing, accelerated
the shift. Because options no longer confer an accounting
benefit, boards consider options a less-attractive approach compared
with other forms of equity pay.

And since the alternatives are costly, boards are studying
them more closely as well. “Options expensing has caused firms
to think about equity programs in a more strategic way,” says
Cross. Companies now make fewer employees eligible to receive
stock. The 2006 data shows that within finance, compared with
two years ago, those executives less likely to get stock-based
long-term incentive plans include top accounting executives, risk
managers, cost-accounting managers, and payroll managers.
Going forward, companies are more likely to provide stock-based
pay to CFOs, treasurers, divisional controllers, and the top
tax, internal-audit, and financial-analysis executives.

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