In recent years, salaries for chief financial officers (CFOs) of large U.S. corporations averaged only about 20 percent of the total CFO compensation package; the other 80 percent is performance-based, variable compensation that includes mostly stock options and short-term and long-term incentive bonuses. Among major corporate officers, typically, only CEOs have a higher percentage of pay that is variable.
a. What does the high portion of variable CFO pay indicate about the importance of CFOs to their organizations?
b. Discuss any concerns investors should have about such a high percentage of CFO pay being variable.