Good morning,
Are you a finance executive getting recruited during this war for talent and considering changing jobs? A new report suggests you might need to strengthen your compensation negotiation skills.
It’s not as if executive pay has suffered in the last year. The median pay packet for leaders at S&P 500 companies rose roughly 12% to $14.7 million in 2021. But a new executive compensation report by Pavilion, a corporate leadership support organization, suggests the rich packages may be causing execs to become complacent and shortchange themselves when it comes to investing the proper time and resources in the negotiation phase of the hiring process.
Just 16% of executives who recently accepted a job hired a lawyer during contract negotiations, according to the report. Meanwhile, 70% said they signed a contract within a week or less of the offer. The data is based on a survey of 800 of Pavilion’s members, primarily executives (VP titles and above) and associates (managers, directors).
Negotiation skills are “more important than ever because we may be heading into a recession, or at a minimum a difficult economic environment,” says Sam Jacobs, founder and CEO of Pavilion, a private educational and support network with members in areas including finance, revenue operations, and marketing. Early warning signs in 2022, such as a deceleration in venture capital funding and layoffs, could portend a slowdown in this “candidates’ market,” he says.
Cash compensation is of course an important element to focus on when evaluating a job offer, but the majority of executive compensation packages “lack key structural benefits critical to ensuring long-term financial security and opportunity,” according to the report. This includes the right to secondary share sales, dilution protection, and buyback equity. “As the dollar amount of compensation surged last year, the adoption rates of these benefits decreased,” the report found.
“I think historically, executives, particularly high growth executives, meaning executives at startups and venture capital-backed companies, inordinately focused on cash compensation to the detriment of some of the other mechanisms that both provide security and stability and opportunity for long-term wealth creation,” Jacobs says.
Cash compensation, and how it’s structured, equity compensation, severance, and the ability to build your own personal brand and become an advisor, are some of the factors that should be included in a structured employment agreement, Jacobs says.
According to Pavilion’s report, the entire C-suite should be paid an 80/20 or 70/30 base-to-bonus to ensure the team is “aligned on long term value creation for the company.”
A recent report by Fortune found that Fortune 500 CEOs earned 205 times what their typical employees did in 2021. I asked Jacobs if there are C-suite execs who take the pay of a company’s ordinary employees into consideration when negotiating their own compensation.
“I do come across those executives, and I think it’s really important,” he says. “But I also think beyond simply looking at what the median compensation might be for an employee, executives should also take into account the company culture. Not just how much employees are paid, but how happy they are.”
Have a good weekend. See you on Monday.
Sheryl Estrada
sheryl.estrada@fortune.com
Upcoming event: Fortune’s inaugural in-person meeting of the CFO Collaborative, presented in partnership with Workday, will take place at Miller Union, Atlanta, on Wednesday, June 22, at 6:30 p.m. The featured speaker for the event will be Clint Watts, senior fellow at the Foreign Policy Research Institute and NBC News National Security Contributor. Watts will share his expertise on cyberterrorism, social media influence and Russian disinformation. The SEC is adopting new disclosure rules mandating that public companies report on material security breaches and their ability to manage cybersecurity risks. If you’re a CFO interested in attending, you can find the registration form here. For further information, please email CFOCollaborative@Fortune.com.
Big deal
New global research by Accenture, The Art of AI Maturity: Advancing from Practice to Performance, uncovers strategies for A.I. through a holistic framework, including a new index to express company A.I. maturity. The research highlights a small group (12%) of organizations called A.I. Achievers that already use A.I. to outpace their competitors. But most companies (63%) are A.I. Experimenters, barely scratching the surface of A.I.’s potential. A.I. Innovators (13%), scoring 50, and A.I. Builders (12%) are somewhat advanced in their level of AI maturity, but the full value of A.I. is left untapped, according to Accenture.
Going deeper
In case you missed it, here’s what was featured in CFO Daily this week:
How CFOs are preparing for a possible recession
Hyatt’s CFO on the biggest trends in corporate travel for 2022
CFOs can’t avoid crypto—and 20% of large companies will use it in some way by 2024
NASCAR’s drive toward DEI is yielding big benefits—to the bottom line
Leaderboard
Some notable moves this week:
Liz Coddington was named CFO at Peloton Interactive, Inc. (Nasdaq: PTON), effective June 13. Coddington succeeds Jill Woodworth, who has decided to step down as CFO after serving the company since 2018. Woodworth led the company through its IPO. This is the latest notable executive change since Barry McCarthy became CEO on Feb. 9, succeeding John Foley who stepped down amid the news the company would shed about 2,800 jobs, impacting approximately 20% of corporate positions. Most recently, Coddington served as VP of finance for Amazon Web Services. Prior to that, she held senior leadership roles at B2B and consumer-facing companies, including as CFO of Adara and Walmart.com, as well as VP of financial planning and analysis at Netflix.
Mariana Coontz was named CFO at DigniFi, a FinTech company in the transportation sector. Before DigniFi, Coontz spent the last eight years at Synchrony Financial, serving in various finance and risk roles. She began her career at JPMorgan Chase in a leadership development program. She held roles across the finance organization in increasing responsibility culminating in her role as the assistant treasurer for the consumer and community bank.
Hemanth Munipalli was named CFO at Remitly Global, Inc. (Nasdaq: RELY), a global digital financial services provider, effective July 18. Most recently, Munipalli served as SVP, CFO at Marketplace Services, and CFO at Egencia at the Expedia Group. Munipalli previously held various roles at General Motors, the most recent as CFO of General Motors China.
Dan Schumacher was named CFO at Protolabs (NYSE: PRLB), a technology-enabled digital manufacturer. Schumacher was currently serving as interim CFO at Protolabs, where he has overseen the company’s investor relations for nearly five years in various leadership roles including vice president of investor relations and FP&A. Before joining Protolabs, he held financial leadership roles at Stratasys and Rockwell Automation for more than a decade.
Jason H. Weber was named EVP/Treasurer and CFO at ACNB Corporation (Nasdaq: ACNB), the financial holding company for ACNB Bank and ACNB Insurance Services, Inc., effective June 1. Weber was selected as the successor to David W. Cathell. Weber joined the company on January 31, 2022, as EVP of finance for the period until Cathell’s retirement. Weber joined ACNB Corporation from Atlantic Community Bankers Bank, where he was EVP and CFO. He previously served as director of corporate development and financial planning and analysis at Fulton Financial Corporation.
Overheard
“The 30-plus-year bull market in interest rates is over, and from here on in, rates are going to be higher.”
—Ellen Hazen, chief market strategist at F.L.Putnam, as told to Yahoo Finance.
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