When it comes to firms listed on the stock market, the public debate on compensation often focuses not just on the Chief Executive Officer (CEO) but also on the Chief Financial Officer (CFO). hkp/// group experts Nina Grochowitzki, Dr. Pia Lünstroth and Regine Siepmann talk to hkp.com about key developments in CFO compensation at Germany's DAX and MDAX firms.
Ms. Siepmann, Ms. Grochowitzki, Ms. Lünstroth, what fundamental developments do you observe in CFO compensation at the leading firms on the German stock markets?
Regine Siepmann: We are seeing a clear increase in average absolute compensation levels for CFOs. These increases are surprisingly large compared to those for CEOs.
Dr. Pia Lünstroth: However, unlike with DAX firms, we unfortunately don't have any individual compensation data at eight of the MDAX firms due to their decision to opt out of the disclosure rules.
So there's no full transparency?
Dr. Pia Lünstroth: That's right. There's still some way to go at MDAX firms. Opting out of publishing individual compensation data is legally possible, but it's not what we would expect from today's businesses. If your company is active on the capital market, you should stick to the conditions that apply there – no ifs or buts. The same conditions should apply to everyone.
How have the compensation figures for CFOs developed?
Nina Grochowitzki: The average total compensation for DAX CFOs in 2015 was about EUR 3.6 million. That represents an increase of roughly 22% year on year. At MDAX firms, the average CFO compensation grew by 29% to EUR 1.7 million.
Dr. Pia Lünstroth: Those are significant gains. For comparison, the CEOs of DAX companies had a largely stable increase of around 1%, and the CEOs of MDAX companies around 3%.
What lies behind the higher compensation increases for CFOs compared to CEOs? 
Nina Grochowitzki: As with all other executive board members, the increases are generally due to the overwhelmingly positive developments in business performance. The reason some CFOs have seen significantly larger raises than CEOs mainly has to do with the individual. We should also remember that the composition of the indexes has also changed, particularly the MDAX.
So, on the basis of the figures, you don't think that there has been a general increase in the value companies place on the role of the CFO?
Regine Siepmann: It's true that the role of CFOs and their responsibilities have grown in recent years, particularly in leading firms on the stock market. That is reflected in the compensation levels. But we do not consider the current increase in compensation to be due to this reason.
How does the compensation of CFOs compare to that of ordinary members of the executive board?
Nina Grochowitzki: Here, the differences are nowhere near as large as compared to CEOs. CFOs earn around 8% more than ordinary members of the board at DAX firms, and around 16% more at MDAX firms.
Regine Siepmann: As a rule, the CEO earns just under double what an ordinary board member earns.
Which firms' CFOs earn the most? In the past, we have seen smaller firms coming to the fore in the DAX.
Regine Siepmann: That is not true for the current period. The compensation ranking for DAX CFOs is headed by the CFO of Fresenius at EUR 7.9 million, followed by Daimler at EUR 7.2 million. The best paid CFOs at MDAX firms are at Metro and Dürr, who both earn around EUR 3.7 million. The difference between the two indexes is clear: the highest individual CFO compensations in the MDAX are only slightly above the average CFO compensation in the DAX.
Dr. Pia Lünstroth: This becomes particularly obvious if you look at the difference between the highest and lowest paid CFO in each index. The range is much bigger in the MDAX: a factor of nine, compared to a factor of five in the DAX.
What is the compensation structure for CFOs at DAX and MDAX firms? Are there differences between the two indexes or compared to other board members, especially CEOs?
Nina Grochowitzki: Compensation structure is fairly similar between leading stock-market firms. Around one-quarter of the average direct compensation for CEOs is made up of short-term variable components, i.e. the annual bonus. With regard to long-term variable components, stock-oriented plans generally account for a share of 35% at MDAX firms and 45% at DAX firms.
Looking forward, do you see any major changes with regard to CFO compensation in 2016?
Regine Siepmann: Basically no, at least as far as compensation structure is concerned. Of course, a decline in business performance will have an impact on variable compensation, both short-term and long-term components.
Dr. Pia Lünstroth: And, of course, the various changes in index constituents will also have an impact on the average figures.

Ms Siepmann, Ms Grochowitzki, Ms Lünstroth, thank you very much!
Author Dr. Pia Lünstroth

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