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Five of the 10 best-paid finance chiefs last year work in the technology industry, as executives at companies from Apple Inc to Google Inc were rewarded for increasing profit, amassing cash and minimising taxes.
Apple Chief Financial Officer Peter Oppenheimer earned the most in fiscal 2012 - a $68.6-million package that dwarfed the $4.17 million awarded to Chief Executive Officer Tim Cook, according to data compiled by Bloomberg. Oracle Corp CFO Safra Catz was second at $51.7 million, making her the highest-paid woman leader, while Patrick Pichette at Google was No. 3, with $38.7 million.
The pay recognises technology executives who finished the year with more than $230 billion in cash and investments - about seven times the total for the other companies with CFOs in the top 10. Stock awards, common at computer and web companies, also helped boost compensation for industry finance chiefs as Google and Apple traded near record highs in 2012.
"They're a key part of the organisation and they're paid accordingly," said David Larcker, a professor of accounting at the Stanford Graduate School of Business in Stanford, California. "It would be very surprising if their performance evaluation wasn't heavily weighted to minimising corporate taxes. That's their job." (At the top of the pile)
Facebook Inc's David Ebersman and Intel Corp's Stacy Smith were among the 10 best-compensated. Their counterparts at VMware Inc, Adobe Systems Inc, EBay Inc, and EMC Corp also made the top 25.
Technology stocks
Technology shares have outperformed the broader market. The Nasdaq 100 Stock Index, which is weighted toward companies such as Apple and Google, gained 17 per cent last year, compared with a 13 per cent advance for the Standard & Poor's 500 Index.
The companies also have lower tax rates. For members of the S&P 500, the average effective rate last year was 41 per cent, compared with less than 30 per cent for the nine technology companies with CFOs who ranked among the 25 highest-paid last year.
Some technology CFOs are minimising taxes by recording fewer profits in the US, which has a 35 per cent corporate tax rate, and more in overseas tax havens, where levies are lower or non-existent. Many companies are able to accomplish this by moving earnings from intellectual property such as patents across international borders.
While the highest-paid technology CFOs may have benefited from lower tax rates, their compensation was also influenced by such yardsticks as revenue growth and earnings expansion. At Google, sales increased 32 per cent to $50.2 billion last year while Apple reported net income that rose 61 per cent to $41.7 billion during its financial year 2012.
'Higher growth'
"They have higher growth year-over-year, strong earnings performance," said Todd Lippincott, leader of Towers Watson & Co's executive-compensation practice for the Americas. "That's reflected in still some very significant year-on-year changes in pay."
At Apple, Oppenheimer's pay was made up almost entirely of stock grants issued to retain top lieutenants after co-founder Steve Jobs died. Apple's finance chief was the fifth-highest among all executives in the S&P 500, including CEOs, according to filings submitted to the US Securities and Exchange Commission as of April 12.
Oppenheimer has guided Apple's cash strategy since becoming CFO in 2004. Last month, he orchestrated a $17-billion bond sale - the biggest corporate offering on record - to help fund a $100-billion dividend and buyback plan. Apple avoided as much as $9.2 billion in US taxes by using debt rather than offshore cash that would have been taxed at 35 per cent, Moody's Investment Services estimates.
Tax rate
Apple's effective tax rate was 25.2 per cent in financial year 2012. The company finished fiscal 2012 with $121.3 billion in cash and long-term investments, including $83 billion outside the US Steve Dowling, a spokesman for Apple, said the company paid $6 billion in federal income taxes last year, for one of the biggest - if not the highest - corporate-tax payments.
Oracle's Catz is a longtime confidant of CEO Larry Ellison, the best-compensated executive in the S&P 500, and helps structure many of the company's acquisitions. Catz and Aon Plc's Christa Davies were the only women among the top 25 paid CFOs. Oracle spokeswoman Deborah Hellinger declined to comment.
Google CFO Pichette benefitted from a change in the policy for the timing of stock payout. Google, which had $48.1 billion in cash at the end of 2012, has seen its tax rate fall for three straight years. Last quarter, the company's effective tax rate was less than 10 percent, after it was able to write off research investments.
Bermuda shift
Google avoided income taxes by shifting revenue into a Bermuda shell company, regulatory filings show. In 2011, Google reduced its tax bill by about $2 billion by legally funnelling profits from overseas subsidiaries into Bermuda, which doesn't have a corporate income tax. The amount moved to Bermuda was equivalent to about 80 per cent of Google's total pre-tax profit in 2011.
Leslie Miller, a spokeswoman for Google, declined to comment.
Facebook's Ebersman, who oversaw the company's initial public offering last year, ranked seventh by earning $17.5 million, while Intel's Smith made $15.3 million and came in ninth. That was partly due to a retention bonus.
Non-technology CFOs in the top 10 included executives from HCA Holdings Inc, Comcast Corp, General Electric Co, Fidelity National Information Services Inc and Activision Blizzard Inc.
Stock compensation
Ashley Zandy, spokeswoman for Facebook, declined to comment, as did Chuck Mulloy, a spokesman for Intel.
Technology has traditionally been among the most lucrative industries for executives. In fiscal 2012, technology industry executives accounted for six of the top-10 highest paid in the entire S&P 500.
Stock makes up the bulk of CFO compensation at technology companies. That is a tactic favoured by many shareholders because it keeps the executives' interests aligned with those of investors, said Steven Hall, a managing director at Steven Hall & Partners LLC, a compensation consulting firm.
"If I tie your pay to the stock going up, then I know the only way you're going to make money is if I make money," Hall said.
CFOs traditionally manage a company's balance sheet and costs and earnings, in addition to investor relations, tax policy, capital and acquisitions. They also must navigate the ever-changing matrix of US accounting regulations, Lippincott said.
'Complex area'
"This is a really complex area, and it's one with a lot of regulatory oversight and legal requirements," he said. "Given the complexity, I think it's no surprise the CFOs are receiving solid" compensation, he said.
The average tax rate of the nine technology companies with CFOs ranked in the top 25 highest paid was about 30 per cent. Excluding Facebook's 89.3 per cent tax rate last year, related to one-time charges following its initial public offering, the effective tax rate for the group is about 22 per cent for financial year 2012.
"Within the rule of law, you want someone who understands" navigating the tax code, said Carola Frydman, a professor of economics at Boston University. "If we don't think this is necessarily fair, then we need to change the tax code."
