Are You Adequately Compensated?

A few weeks ago, my colleague Chris Koch blogged about CIO’s salaries. He thinks CIOs are underpaid for the responsibilities they hold. He bases his opinion on CIO‘s 2007 State of the CIO research, which shows that IT executives’ salaries have declined since 2002. Today, as part of CIO.com’s package of stories on compensation, I’m writing to respectfully disagree with him. (Sorry folks, you’ll find no entertaining “Jane, you ignorant slut!” type epithets between Chris and me; we keep our debates dignified, much like the ancient Greek philosophers.)

Before I explain my rationale for contradicting Chris’s contention about CIO salaries, I should note that playing devil’s advocate with him will have one of two outcomes: He’ll either think my post unworthy of response and he’ll ignore it, or he’ll pen a rebuttal in which his logic and reasoning completely blows me out of the turbid blog waters—albeit in his characteristic respectful yet forceful manner—and has me scuttling off to a remote virtual cave for cover, where I’ll lick my wounded ego. Of course, there’s a third outcome, also highly likely, which involves the firestorm of criticism and “Meridith you idiot” type barbs I’ll likely inspire in readers for voicing the unpopular opinion on the subject of CIO salaries (read: they earn plenty!) I assure you that I’m not disagreeing with Chris for the sake of being contrary and fomenting controversy: I really do have a beef with the data Chris presented in his blog entry that forms the basis of his thesis.

According to our 2007 State of the CIO research, the average CIO makes $23,562 less than s/he earned five years ago. Our research also shows that CIOs’ “average salary has remained flat since last year [2006] and has risen only one percent since 2002.” Those data points are what gave pause to Chris and formed the foundation of his blog post. My problem with those numbers is that I don’t think they accurately reflect total CIO compensation. When polling CIOs about their earnings, you can’t ask them just about their salaries; you have to ask them about their total compensation because they’re not compensated like Chris and me and the rest of the proletariat.

In addition to their base salary, IT executives (especially those at Fortune 500 companies) are often handsomely compensated with bonuses, equity, stock options and other perks that, when added up, can equal or exceed the value of their base salary. That means they can be banking twice as much money (if not more) than their base salary indicates. Hence the problem with using their base salary as the barometer for measuring the quality of their comp.

If we had asked IT executives in our 2007 State of the CIO survey about their total compensation, we probably would have seen an uptick in their earnings, especially this year with the growth of the economy and the competition for CIOs driving up their compensation.

My point is, I wouldn’t worry so much about data that shows that CIOs’ base salaries are declining. If they’re being generously compensated through signing bonuses, performance bonuses and/or stock, then their base salary is a moot point. (If not, then yeah, we got something to worry about.) In fact, in some industries, such as financial services, “base salary is a small component of overall compensation,” says Rich Brennan, a recruiter with Spencer Stuart.

In general, says Brennan, the larger the public company, the larger the piece of the compensation pie is given over to performance bonuses and equity. (This type of compensation structure is favored in large public companies to align executives’ incentives with their responsibility to maximize shareholder value.) So if we had a disproportionate number of IT executives responding to our survey from industries such as financial services that offer “low” salaries (low being a relative term, of course) that might account for what looks like a decline in CIO earnings but which really isn’t because the question didn’t ask about total compensation.  

I’m not the only one who’s not too concerned about the State of the CIO survey data. Spencer Stuart’s Brennan says the salaries of the CIOs his firm has placed are on a “slight, modest upward trajectory.” Okay, so they may not be making money like the U.S. mint, but they’re not losing it, either.

Gerry McNamara, a recruiter with Heidrick & Struggles doesn’t see CIO compensation diminishing either. “There’s still a war for talent going on. We’ve got half a dozen very hot CIOs we’re trying to recruit for our clients, who are all going to have to pay more than what the individual is making now,” he says. “Our clients are not going to recruit someone for less money than what the individual currently makes unless he or she has other personal reasons for taking the job. Most people don’t do the job for less.”

What’s your take on this debate? Do you feel fairly compensated for the job you do? Has your total compensation increased or decreased? How does your compensation package break down?

Thanks for reading and for sharing your thoughts. We’ll get back to our regularly scheduled roster of CIO announcements tomorrow.

–Meridith