Some CIOs of endowments and foundations are averaging higher total compensation than their corporate counterparts, according to a recent Pensions & Investments survey.
The survey polled 452 pension fund executives on their total earnings: base salary, as well as bonus and other incentives. The biggest group responding to the survey, slightly more than 45%, were from corporate funds; government fund managers made up more than 29% of respondents, with about 13% from foundations/endowments and 12% from union funds.
The results showed pension managers and chief investment officers of endowments and foundations averaged considerably higher total salaries than their colleagues in corporate funds. The average pension manager for an endowment earned $176,500, whereas a corporate pension manager averaged $129,471.
The compensation gap was even wider for chief investment officers. The average total remuneration for an endowment/foundation CIO was $340,750; his corporate counterpart earned, on average, $202,333 or approximately 40% less.
Government and union pension managers and CIOs averaged far less total compensation. Union pension managers averaged $96,200 while government managers earned $94,333; union chief investment officers averaged $200,000 and government CIOs, about half of that amount, with an average total salary of $101,000.
Although he questions whether endowments are as generous as the survey figures indicate, Nicholas Crispi is adamant that senior government investment officers are severely underpaid. "While I haven't seen any evidence that endowments are paying higher salaries than corporations, there's no doubt that many senior public fund investment officers are paid peanuts," explained Mr. Crispi, president of the executive search firm Crispi, Wagner & Co., New York. "It's very difficult finding the quality of senior management that our clients are looking for, certainly more difficult now than two or three years ago. And those organizations that are willing to pay less have to realize there's an increased risk that the financial officer will eventually receive a better offer. They can build their reputation, do a really good job and then they're gone."
Mining gold-quality executives amid an economic boom has had a spillover affect on the task at hand for executive search professionals. Mr. Crispi explained that whereas his firm traditionally would take three to four months to find a senior financial officer, "today on average that figure would be between six and seven months."
WANTED: CIOs
Linda Tice, a senior recruiting associate at Russell Reynolds Associates Inc., San Francisco, echoed Mr. Crispi's view of the shortage of qualified senior financial officers. "Clearly this has been one of the strongest markets for CFOs and CIOs in recent years," she said. "There's little doubt that demand is greater than even a few years ago. CFOs, for example, are constantly in demand. I deal with a great many high-tech and biotech start-up firms, and in those smaller to midsize firms, the CFO is always one of the primary people who is required right away."
Another surprise finding of the survey was treasurers and chief financial officers of midsized funds were, on average, better compensated than counterparts at larger pension funds. The average total compensation for a CFO at a company with fund assets between $250 million and $999 million was $236,467; at companies whose funds had more than $1 billion in assets, the CFO averaged $230,667. For treasurers at funds with $250 million to $999 million, the average remuneration was $181,222, but for funds of more than $1 billion that figure was $179,857.
By contrast, total salaries for pension managers varied in sync with the size of the fund. Highest paid were managers at funds of more than $1 billion - they earned an average total salary of $134,742. Those managing pension funds between $250 million and $999 million averaged $106,625; managers at funds less than $250 million had an average total salary of $96,781.
Gender gap still there
The gender gap remains firmly in place among fund executives. A male chief investment officer with 10 to 19 years experience had a base salary of $116,571; his female equivalent earned a base salary of only $71,000. The pay gap was even larger for chief financial officers. Male CFOs with 10 to 19 years of experience earned an average of $173,778, while female chief financial officers with similar experience averaged only $84,000. The gap narrowed somewhat for CFOs with more than 20 years experience; male CFOs in that category had base earnings of $132,333, while their female counterparts averaged a base salary of $100,000.
"Unfortunately, it's (the gender wage gap) still very true," explained Mr. Crispi. "We argue against it. And the gap is narrowing a bit, as the demand for people has helped to level out the discrepancy between the sexes. But there really should not be any gap, because any of these people we recruit are capable of doing this job. We go out and look for people we believe are underpaid, and so more and more we are recruiting females."
The value of experience
The survey also found that, in the world of chief financial officers, experience pays - but only to a point. Average base salary for a CFO with less than 10 years experience was $122,421, while CFOs with 11 to 19 years experience averaged $164,800. However, CFOs with more than 20 years of experience had a base salary of almost $40,000 less - averaging only $127,714.
Similarly, CIOs who had less than a decade of experience averaged $112,370, while those with 11 to 19 years earned about $7,000 less in base salary. CIOs with more than 20 years of experience earned an average base salary of $140,083.
"One explanation for that finding could be that the CFOs' total compensation is a lot higher, but it comes from a smaller base," explained Mr. Crispi.
"There are some large firms whose highest salaries are $150,000, but they employ the highest paid people in the business. How do they get it? Through bonuses. Also, people at that age and experience have made money and don't require current income. They know the game, and they know they're going to receive such things as stock options and cash bonuses, whereas younger people want the salary and don't want promises."
Time spent on investments
The survey also indicated, not surprisingly, CIOs are the executives spending the greatest amount of time on "investment matters". Approximately 55% of the CIOs responding said they spend "more than 75%" of their time handling investment affairs. By contrast, 53% of chief financial officers and 58% of treasurers spent less than 25% of their time dealing with investment decisions.
Slightly less than a quarter of pension fund managers said they spent more than 75% of their time on investment matters; about 32% of pension managers spend less than a quarter of their day handling investment issues.
The survey also found that treasurers were the fund executives with the most personally at stake in their companies' success. Almost one-third of treasurers responding to the survey owned equity in their company; approximately 25% of chief financial officers had equity in their company, while 18% of pension managers held equity in their organizations.
Other findings in the survey included:
More treasurers, 53.3%, received bonuses than any of the other job titles surveyed. Only 34% of chief financial officers reported receiving a bonus, along with 50% of pension managers and 37.4% of chief investment officers. Overall, however, more respondents reported not receiving (54.6%) bonuses than receiving them.
Of those receiving bonuses, 28.9% of respondents said they were based on their company's profitability and only 6.4% said it was based on performance.
A set formula was mentioned by 6.7%, and 11.1% said bonuses were determined by subjective criteria.
Of the respondents overall, 86.9% were responsible for a defined benefit plan; 57.6% were responsible for the defined contribution plan; 8.9% responsible for an endowment fund; and 12.4% for a foundation.
