Among public home building company “named executive officers”–those individuals who get specific mention in SEC filings as an organization’s highest-paid employees–chief financial officers tend to clock in with the third-best compensation package of the bunch. For our basket of 19 home building organizations, CFO comp for 2017 ran the gamut from Lennar’s newly anointed ceo of Lennar Financial Services (as well as CFO) Bruce Gross, with total pay of $5.2 million to Green Brick Partners CFO Richard A. Costello, who clocked in with 2017 compensation of $867,537.
And these days, professional finance skills, strategies, and tactics for sprawling real estate, community development, and construction operations empires beeline directly into the throes of each enterprise’s most critical initiatives, public debt and equity positioning being only the start of the litany of accountability areas–tax accounting post a huge and complicated set of rules changes, portfolio management of resources around local market scale, regulatory compliance, risk management, mergers and acquisitions, not to mention the whole new game of procurement due to come out of growing new connections with off-site factory production partners.
The chief financial officer–using the levers of access to and use of the financial lifeblood of a home building company’s capital pool–works in a more strategic role than ever–well beyond the scope of accounting, budgeting, controlling, and planning and analysis, and even beyond more specialized finance responsibilities that focus on treasury, audit, tax, and investor relations.
Public builder CFOs get a seat at the table on matters like strategic leadership, organizational transformation, big data applications for both internal operations and customer relationship management, as well as, in many cases technology’s increasing role in operations, information technology, and cybersecurity.
If this all sounds like justification for highly remunerative pay packages among the nation’s public home building organizations at the CFO level, well then, so be it. There have been four public-to-public acquisitions in the past three years, a trend we don’t think has played out to the end yet. Pursuing deeper local market scale and its benefits–clout with local trade crews, stronger influence among land sellers, improved market knowledge of would-be buyers, and a host of other operational efficiencies gained from geographical concentration–is likely to continue to draw on both portfolio management and M&A proficiency among the CFO peer class.
In total, the comp packages of our 19 public company CFOs for 2017 added up to $44.4 million, just under 15% of the total $300 million that 73 total NEOs earned last year.
Median compensation for the peer group of CFOs is $2.3 million, creeping slowly upward toward where those wage packages peaked 12 years ago, in 2006, when the median CFO comp package clocked in at $2.4 million.
Reflecting the increasingly strategic function, responsibilities, and accountability the CFO group has taken on, base salaries tend to represent less and less of the total potential earnings for many of these executives. Acquisition, integration, tech initiatives, and operational programs with high performance outcomes make for an increasing number of financial incentive opportunities for the group.
