CFOs raked in a median of $1.45 million in fairness compensation final yr says Heidrick & Struggles
Good morning. Kevin Kelleher right here filling in for Sheryl.
Personal fairness had a banner yr in 2021, with deal worth at PE companies rising 91% to $1.1 trillion. That heady tempo of dealmaking has created intense demand for CFOs that may assist proper generally difficult financials at firms in PE portfolios.
However determining what to pay CFOs at PE-backed firms can itself be difficult. Put in CFOs are—together with CEOs and board chairs—instrumental in reshaping firms that PE companies purchase. They should execute on a selected imaginative and prescient, akin to shepherding an organization’s steadiness sheet and money circulation in response to a brand new funding thesis. Typically, that imaginative and prescient is dictated by the PE traders.
Heidrick & Struggles launched this morning its 2022 compensation report for CFOs at PE-backed firms. The chief-search agency surveyed 656 senior monetary officers, 56% of which had greater than a decade’s value of expertise as CFO with 22% having a decade or extra at PE companies below their belt.
The median CFO wage within the survey noticed base compensation at $313,000 and bonuses at $125,000. Fairness compensation, in the meantime, got here in at a median $1.45 million for the 73% of U.S. respondents who acquired such a package deal.
“We’re seeing fairness compensation is down and money compensation is up. From a recruiting perspective, firms have wanted to regulate to the aggressive nature of the market,” Elizabeth Simpson, a associate at Heidrick & Struggles, tells me. “The market has simply change into rather more aggressive over over the past couple of years for CFO expertise.”
Compensation assorted by firm income, with extra pay going to greater than smaller ones, in addition to by business. Median compensation was highest for the expertise sector, adopted by power and enterprise providers. Fairness compensation, in the meantime, was most beneficiant in shopper firms, adopted by tech and monetary providers, Heidrick discovered.
PE portfolios will not be as clear as publicly traded firms, however these firms make use of almost 12 million workers and generate round 7% of U.S. GDP, in response to the American Funding Council. After a number of years of growth occasions, a slowing economic system and rising rates of interest are shifting the panorama for the business. On the one hand, borrowing to finance buyouts might change into extra pricey. On the opposite, struggling targets in want of a turnaround are prone to change into extra commonplace.
“The PE deal pipeline continues to be strong, and volatility contributes to that,” Simpson says. “And that volatility can shift the CFO market. Some firms might look to restructure, so the CFOs may have a distinct ability set.”
Basically, a CFO at PE-backed firms will want the usual ability set of any good senior monetary govt: management expertise to mentor and inspire others, a strong finance background, and powerful operational and strategic administration. Inside PE firms, CFOs may additionally should be extra palms on, with the agility to translate the fund’s monetary targets and guarantee clean communication between the board and staff to make these targets a actuality.
Whereas many CFOs working with PE funds have expertise inside that business, “public firm coaching is definitely very helpful for these roles,” Simpson says. “The best candidate transitioning into a bunch stage CFO position may need had public firm expertise in a senior management position.”
Basically, CFOs haven’t been resistant to the consequences of the Nice Resignation, with 70% of C-suite executives mulling a job transition within the wake of the COVID-19 pandemic. “There’s already unbelievable competitors for CFO expertise, and the Nice Resignation has added to that,” Simpson says.
That ought to preserve demand for CFOs, at each PE-backed firms and normally, agency for the close to future, even when it is not as overheated because it was in earlier years. “CFO candidates searching for one other place nonetheless have two or three competing job gives,” Simpson says.
See you tomorrow.
One month into the season for second-quarter earnings, the winners and losers of 2022 have gotten extra clear. With 56% of S&P 500 firms reporting outcomes to this point, 73% of them noticed a optimistic EPS shock whereas 66% disclosed a optimistic income shock, in response to Factset. Steering is combined, with Vitality and utilities estimating EPS beneficial properties of 8.1% and a couple of.1%, respectively. Communications providers are bracing for a 5.5% drop in EPS this yr, adopted by supplies (down 2.6%) and shopper discretionary items (down 2.1%).
Courtesy of Factset
As inflation continues to hover close to a 40-year peak, Microsoft, Walmart, and different firms are giving raises to assist retain staff, a Fortune report from Paige McGlauflin and Amber Burton famous. Some HR specialists, nonetheless, warning leaders to maintain a detailed eye on the already cussed gender wage hole throughout this time. The pay hole between women and men within the U.S. was 22.1% final yr, in response to the Financial Coverage Institute. That is down from 23% in 2020.
“The info exhibits that extra environmental and social shareholder proposals have been profitable at annual conferences on the top-performing firms by whole shareholder returns within the 12 months main as much as the vote. Moreover, common assist for environmental and social shareholder proposals was increased on the top-performing firms.”
Governance firm Diligent, which discovered that ESG proposals at company shareholder conferences are on the rise—though the overwhelming majority of votes are nonetheless in opposition to them. Solely round 1 in 4 proposals are getting “sure” votes, Diligence mentioned in analysis ready for Fortune.
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