CIOs rank among top paid execs at 47 Fortune 1000 companies
We in technology have gotten pretty good at assessing the financial value of projects, but not so much at figuring out what a CIO is worth. Or, if not worth, at least what to pay him. Or her.
Unlike a CEO, whose compensation rides mainly on measures of the company's financial performance, a typical CIO takes home a pay package less dependent on metrics such as share price or return on equity. Generally, it's a mix of base salary and, for hitting soft and hard goals, bonuses. Sometimes there are shares of stock.
That's most CIOs. Then there are the heavy hitters, the CIO elite who set corporate strategy alongside the CEO, CFO and other top execs—and get paid like them.
Half or more of the total pay for these CIOs is tied to long-term incentive plans, involving measures of the company's performance over time, says Vincent Milich, director of IT effectiveness at Hay Group, a consulting firm. "By hewing to performance measures that are long-term and linked with business success, IT leaders align themselves with the CEO and the enterprise, and change the impression that they're a cost center and staff job," he says.
With so much at stake, these high-powered CIOs know that to be successful, they need trustworthy people in key positions, says Victor Janulaitis, principal at the compensation consulting firm Janco. CIOs at this level commonly bring an entourage of two or three managers with them who "understand what they say, how they say it and what they mean." (See "The CIO's Dream Team.")
So who are this year's top-tier technology leaders and what do they make? Every year, public companies must file proxy statements with the Securities and Exchange Commission (SEC) to show what their top five highest-paid executives earn in salary, bonuses, perks and incentive pay such as stock and options awards. We studied the filings of the 1,000 biggest U.S. companies to see what compensation looks like for CIOs ranked and rewarded highly enough at their companies to be included. Not many make the cut. This year, 47 top technology executives were listed at the 1,000 companies. That's down slightly from last year's 52, but about the same overall count since 2001.
Clearly, these companies—especially in financial services, manufacturing and retail—value their technology leaders. According to the latest SEC filings, which show 2007 compensation, our 47 superstars together earned $112,651,463. That's down 18 percent from the $137 million earned for 2006. Still, at $435,200, the average salary (excluding bonuses and other compensation) for this group far outpaces average salaries for CIOs generally. In our latest "State of the CIO" survey, CIOs at companies of $1 billion or more in revenue reported an average salary of $344,400.
Demand has declined for CIOs as their average tenure increases. And in this poor economy, companies are reluctant to assume the risk of replacing their top technology leaders, Janulaitis says. "Organizations are in a holding pattern in IT right now," he says.
Most of the fat payouts in 2007—77 percent—came not from salaries or bonuses but from the innocuous sounding "Other" category.
Other, indeed. That could include anything from company contributions to a CIO's 401(k) to thousands of dollars' worth of time on the corporate jet to millions in long-term incentive payouts. No. 1-ranked Barbara Desoer received $10.5 million in total compensation as global technology and operations executive at Bank of America, with $9.7 million of it coming from such sources. The two biggest chunks: $4.7 million in stock and $2.2 million in options. Incidentals included $15,500 worth of corporate plane use and $16,700 for financial counseling on how to manage her millions.
In May, Desoer received more recognition: a promotion to president of consumer mortgage operations for the merged Bank of America and Countrywide Financial when that acquisition closes later this year. She's moving from North Carolina to California.