The highest-paid CFOs in the country are making millions, but how can you join their ranks? The key is to take on more strategic roles. Kevin Gormely, Managing Partner of Boyden's Toronto office, shares his perspective in this special to Financial Post.
The highest paid CFOs in the country are making millions, but how can you join their ranks? The key is to take on more strategic roles.
Compensation for CFOs in Canada has climbed to as much as US$27 million as executives take on more strategic roles in companies.
The combined salary 10 of the highest paid CFOs in the country came in at about $80 million, according to calculations made from a recent Report on Business (ROB) ranking. That's the equivalent to what Taylor Swift made, or closer to home, Justin Bieber, according to the Forbes celebrity list.
Are executives closing in on rock star status? Perhaps, for those at the top end of the scale. Overall, the median salary for CFOs in Toronto is $151,279 and across Canada it's $131,604, according to PayScale, which claims to have the world's largest database of salary profiles. In order to bridge the gap between average and high performance pay CFOs need to move with the times, said Kevin Gormely, a managing partner at Toronto based executive search firm Boyden.
"The most important thing any senior finance person can do to is to focus on how to use their skills to propel growth and have a fundamental impact on success," Gormely said. "This will mean more senior, strategic audiences internally, more cross-disciplinary responsibilities, and more interest from other organizations."
In short, the highest-earning CFOs, such as Howard Schiller, who made more than US$27 million, according to the ROB ranking (based on information from the largest public companies in Canada as of Dec. 31, 2014), are becoming strategists. Although the Valeant Pharmaceuticals International Inc. CFO stepped down from the position in June, he's remained close to the firm as a corporate director.
"As companies have become more global and therefore have to become more strategic, the scope of the CFO has increased and made them more involved in the strategic direction of the company," said Burke, whose experience includes taking companies both public and private.
Some of the best opportunities arise when companies go through transition periods, said Burke, who helped Toronto-based Renee’s Gourmet Food Inc. through a troubled patch and then sold it to Heinz Canada, a unit of H.J. Heinz Co., after a bidding war in 2006.
Michael Conway, president and CEO at Financial Executives International Canada, said CFOs need to build trust to become strategic partners with CEOs.
They need to provide accurate numbers and show they understand a company, he said.
"They move on to facilitate solutions in the business, to help operational units develop reliable business plans," he said, adding the next step is to move into a strategic role and ultimately become a board advisor.
In doing so, CFOs will pick up many competencies along the way. They may find themselves in charge of IT functions, and risk management, said Boyden's Gormely. One client he met with recently was filling a CFO role responsible for both risk and business development.
"It's important for that individual to get wide exposure around the organisation," Gormely said, noting as they progress they may have responsibility for a business unit.
As CFOs position themselves in more strategic roles, their compensation structures are changing. Ten years ago, their packages relied heavily on base salary with some short-term incentives such as quarterly bonuses thrown in.
Now, long-term incentives (LTIs) such as stock options have become more prominent. CFOs can see up to 60 per cent of their payouts based on longterm performance, reflecting their increasingly pivotal role in organizational strategy, Gormely said.
The change in pay structure began around seven years ago, said Torontobased Kevin Jeewan, VP of permanent and search services at financial executive search firm Lannick Group. Before that, accountants were very risk averse.
"They're becoming more risk tolerant," he said. "They know that the risk reward is there, and if they do the right thing by the business and they are longterm stewards for the business, they can do extremely well financially."
LTIs also act as golden handcuffs in an environment where CFOs with specific talents are thin on the ground, experts suggest. As they become more strategically focused, they become less portable. Finding the right talent for an organization's specific needs is becoming more challenging, said Toronto based Elan Pratzer, managing partner at executive search firm Caldwell Partners.
Pratzer has sometimes been forced to bring U.S. CFOs north of the border to plug the gap, he said, adding that creates its own challenges, ranging from spousal visas to cultural issues.
CFO salaries will continue to rise as the executives move to the centre stage alongside CEOs. This shift to playing key strategic roles is necessary to support Canadian firms as they become more integrated with economies overseas, Pratzer said.
"It's the global competition issue," he said. Those Canadian companies that want to grow into larger, world-class firms must engage in markets outside their own borders – and they need world-class financial expertise to do it.
This article orginally ran in Dec 2015 - Financial Post, in the “Executive” section