(Variable pay and incentives) In recent years, salaries for chief financial offi¬ cers (CFOs) of large U.S. corporations averaged only about 20 percent of the total compensation package; the other 80 percent is performance-based, vari¬ able compensation that includes mostly stock options and short-term and long-term incentive bonuses. Among major corporate officers, typically, only CEOs have a higher percentage of pay that is variable.

a. What does the high portion of variable CFO pay indicate about the im¬ portance of CFOs to their organizations?

b. Discuss any concerns investors might have about such a high percentage of CFO pay being variable.

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