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Compensation packages for the highest-paid CFOs in the United States just about doubled over the past year: On average, total remuneration for the Global Finance Top 100 group of chief financial officers shot up 83%, to a stunning $4 million.That performance follows two banner years in which CFO pay for the Top 100 has marched relentlessly upward, driven by a gung ho stock market that has tipped options packages into the money and beyond. Last year, when Global Finance reported that average total remuneration for the 100 best-paid CFOs rose by 97%, experts declared the peak might have been reached. It turned out that pay levels in 1997 were merely a promontory that led to another, higher peak in 1998-and CFOs have scaled it with ease.

The numbers are dizzying. According to research provided by Standard & Poor's Compustat, the average $4 million total remuneration of the 100 best-paid CFOs from among the 350 largest US companies compares with an average total pay package of $2.2 million in 1996, and $1.5 million in 1995.

Three years ago only the top 58 CFOs in the ranking weighed in at the million-dollar level. Today this group of senior executives has seemingly strolled down a Monopoly board and landed on Free Parking in lockstep. Their average base salary plus bonus topped $1 million for the first time since Global Finance began running the ranking, up 16% from 1997. Long-term incentive payouts, which include grants of restricted stock, rose 9%, to $426,620. But it was options that whisked CFOs down easy street in a stretch limo. Exercised options in CFO packages soared 186% over last year's already lucrative $903,720.

How the CFOs Were Ranked

To arrive at the best-compensated chief financial officers in the United States, Global Finance asked Compustat to survey the proxy statements of the 350 largest publicly traded companies in America by market capitalization. Our list ranks the top 100 CFOs from among those companies where the proxy statement lists pay for a CFO.

It should be noted that US proxies list only the five most highly compensated officers. Especially in large, multidivisional corporations, well-paid CFOs could conceivably have higher compensation than counterparts who made the Global Finance listing but not show up because they aren't among their companies' top five scorers.

Ira T. Kay, practice director, executive compensation, at Watson Wyatt, a New York executive search firm, sees a correlation between pay and performance in the numbers. "CFOs play a central role in acquisition strategy. And that's only one way in which this job is being considered more and more strategic." He adds: "Boards are saying, `Hey, we'd better link this job to increases in stock price."'

Watson Wyatt's recent Survey of Top Management Compensation, which studied pay practices for finance departments at 1,406 US companies, found that CFOs and other top executives in finance received an average multiple of 2.4 over base salary. This jibes with Global Finance's ranking of the best-compensated echelon.The Global Finance 100 earned an average multiple of 2.7-higher, but in the same ballpark as the broader group polled by Watson Wyatt. The Watson Wyatt study attempts to show the relative importance of senior finance executives to other officers in the company as measured by the amount they earn. The CFO pay multiple, for example, is exceeded only by CEOs, who garner 4.3 times base pay, and chief operating officers, who run virtually neck and neck with CFOs. Says Kay: "The rises in CFO pay reflect that the role has become nearly as crucial to a company's wellbeing as the COO."

But other experts see no neat trend to the gigantic leap in pay, arguing that huge compensation reflects no more than an upward-bounding market and enormous good luck. Some options have been on the books for years, and CFOs, taking full advantage of a market that has driven the stock of even modestly performing companies sky-high, are cashing out rather than risking a downswing. "They're exercising now," says Rhoda Edelman, a partner at Pearl Meyer, the New York compensation consulting firm, "because they worry that the market is at a peak and that they may lose out if they don't act."

Graef Crystal, the compensation consultant and scribe of the Crystal Report, a compensation newsletter, puts it more bluntly. "The idea that this level of pay is connected directly to performance is ludicrous. Like CEOs, the packages keep going up and up and have only a tenuous relation to merit or improvement of shareholder wealth:' Referring specifically to the massive options grants, Crystal finds them "aa trifle mystifying. They seem to imply that CFOs need an options package just to get out of bed in the morning and head for the shower."

If so, Rollin Dick, CFO of consumer insurance company Conseco, must be taking a lot of showers. He tops the ranking for the third time and second consecutive year (he dropped off the list in 1996). Dick's 1997 salary increased 202%, to an astounding $39 million, an amount that equaled 25% of Conseco's 1998 first-quarter earnings. The bulk of the compensation comes from an options exercise of $34 million, a very thick icing atop a cake of $4 million in base salary and another million in long-term incentive payout (LTIP).

Conseco's compensation policies, which apply to all six top executives of the company, have earned the dubious honor of being excoriated by the AFL-CIO's Executive Paywatch. The group complains of CEO Stephen Hilbert's close ties to members of the company's compensation committee and scolds him for parties at his Indiana estate, dubbed a "French chateau" by the Indianapolis Star.

The high numbers in Dick's pay package reflect the central role that finance has paid in the booming success of the company. Conseco's market capitalization has undergone a steady rise, to $8.7 billion, since 1991 as the company pursued an acquisition strategy of buying competitors to become a leading provider of supplemental health insurance, retirement annuities, and universal life insurance.The buyouts, worth $3.5 billion in 1996 alone, have been so numerous that shareholders can scan an "Acquisition Glossary" on the company's web page. In 1997 Dick spearheaded Conseco's pending acquisition of Green Tree Financial, which represents a strategic move into financial services. The stock-pooling transaction was approved at a shareholders' meeting on June 30. The $6 billion bid for Green Tree tallies as Conseco's largest acquisition to date and shows "That we recognize we need to move away from a single focus and broaden our base in financial services, says Dick. Owning Green Tree will move the company into consumer and commercial finance, including manufactured-housing loans.

Dick has used favorable market conditions and sophisticated techniques to refinance debt, which he says reduced the average cost by 114 basis points in 1997. Part of this refinancing was a $500 million convertible debt issue dubbed "feline pride" notes by underwriter Merrill Lynch.The notes involve two contracts sold to a single investor simultaneously-a trust preferred instrument and a stock purchase contract that require an investor to buy stock when Conseco repays the initial loan.Although the notes are eventually converted to equity, for both the company and the investor they are treated as debt instruments, which carry a tax-deductible feature. Conseco also issued $250 million in senior notes and $800 million in medium-term notes in 1997, using the money to complete the financing on several outstanding insurance company transactions.

Despite these shareholder-friendly actions, Conseco's compensation committee has launched a program to address the heavy dilution caused by options in its outstanding shares. The program encourages Conseco executives to exercise options in the money immediately. In return, Conseco issues the executive a certificate for a mixture of new shares and a "reload" of a new package of options. Says Dick: "The upside is two-fold: It gives an immediate tax deduction and provides more shares outstanding and fewer shares in the stock option category." Sounds good, but critics have noted that the method only marginally addresses the dilution problem, while giving Conseco's executives even more upside potential.

Will Dick appear as top dog in next year's Global Finance ranking? "That all depends on the market," he says, adding, in the spirit of last year's interview: "Please stop publishing that list!"