Pay packages for chief information officers are rising as the executives get more business duties added to their traditional roles as technology overseers.
This year's our ranking of high-paid information-technology executives includes 39 millionaires, up from 21 last time.
Every year, we sift through financial documents of the 1,000 largest publicly held U.S. companies to find those that value their technology chiefs highly enough to place them among the five top-compensated executives at their companies. Public firms must disclose who their five best-paid officers are, and what they make, in annual proxy statements filed with the U.S. Securities and Exchange Commission.
This year, we found 52 technology executives among the 1,000 companies, which is about average for the six years we've done the survey. Caveat: These aren't the 52 most highly paid CIOs around. Someone like Randy Mott at Hewlett-Packard, for example, may make more than some on our list (Mott pulled in over $10 million in 2005), but it's hard to know because he wasn't in HP's proxy this year. (HP declined to comment on Mott's 2006 compensation package.)
The jump in multimillion-dollar pay packages for 2006 isn't surprising, considering that fewer than half of the executives in our ranking have plain "CIO" titles. Twenty-nine of the 52 also manage operations, logistics, customer service or other business areas. Jeff Fox, whose $9 million paycheck last year puts him at the top of our list, oversees technology inside Alltel but also is president of Alltel's shared services group. He's been at the company 11 years and, at age 44, is one of the youngest execs on our list.
Dave Kepler (No. 13, $4.3 million) has served nine years as CIO at Dow Chemical and also now leads the company's shared services group, plus its environment, health and safety group. Joe Antonellis (No. 5, $6.3 million) is not just CIO at State Street but also a vice chairman.
Roy Dunbar (No. 8, $5.2 million), president of global technology and operations at MasterCard, counts more career years spent outside IT than in it. Before joining MasterCard, Dunbar managed sales and marketing, as well as technology, at Eli Lilly. He holds pharmacy and business degrees.
When he joined MasterCard in 2004, Dunbar says he saw that the financial services industry was "at a point where there is no longer an established model you can rely on. It's important for me to take lessons from many other disciplines."
For example, across the U.S., electronic payments are replacing about 10% to 15% of cash and check transactions each year, Dunbar says. So, he has helped refine PayPass, MasterCard's electronic system that lets consumers pay for goods by waving a card past an RFID reader. With no receipts to print and sign, time to process transactions drops by at least one-third, Dunbar points out.
"I have a great personal advantage in that I'm not a technologist," he says. "I don't have a pre-made framework for what technology can and can't do."
Technology leaders nowadays have to meet an increasingly wide set of expectations. For starters, they must not install any new technology without a business need. And many chief executives also expect CIOs to find new sources of revenue, or perhaps think up entirely new businesses, through technology.
A top-notch CIO needs to know more details about how each part of the company operates than his counterparts have to know about IT, according to John Stevenson, who has been CIO at Sharp Electronics and Avaya and is a former president of the Society for Information Management. "You need to have a dose of knowledge of every other executive position to be successful," he says.
"Even given that all leaders in a corporation have miseries," Stevenson adds, "CIO is a very difficult job."
The three legs of executive compensation--base salary, bonus and stock--played out differently at the top and bottom of our ranking. Eight of the top 10 didn't get bonuses last year, though all 10 received millions in stock and other equity. For the 10 at the end of the list, bonuses accounted for as much as 45% of total compensation.
Not surprisingly, financial services firms (including banking and insurance) dominate this year's ranking with 15 entries, so dependent is that industry on technology to operate and innovate. Retail is second, with 11 executives on the list. Best Buy's Bob Willett, who made $8.6 million last year, ranks No. 2 overall.
Women make up 13% of our ranking,compared with just 4.3% last year. The seven women on this year's list include Linda Goodspeed (No. 19, $2.5 million), the top technologist at manufacturer Lennox International; Anna Ewing (No. 24, $1.9 million), CIO and executive vice president of operations at Nasdaq; and Mahvash Yazdi (No. 25, $1.9 million), CIO at utility firm Edison International.
So, what are some of the specific tasks that a top-paid CIO needs to be able to handle? Interaction with board members is one of them.
Tim Shack (No. 7, $5.9 million), CIO at PNC Financial Services Group in Pittsburgh, meets with the company's board several times a year to describe business projects and the technology behind them and provide regular updates. Last fall, PNC's board met for 3 hours specifically to discuss emerging technology trends that might affect the company, Shack says. "You know those Consumer Reports ratings--the little circles filled in all black or half black? We did those to assess where we think we are and how each business unit is positioned against trends in the industry 12 months and three years out," he says.
Not every board meeting gets so granular. Some are briefer project updates at a higher level, says Shack, who is also CEO of PFPC Worldwide, which sells financial services to other investment management companies. It's his job to "understand where the board wants to go on certain subjects."
The supporting-actor quality of being a CIO also carries with it the requirement for tact, specifically for finding ways to say "no" without ticking off colleagues. Shack tries to prevent the discussion from reaching that point by having business managers move their ideas through a vigorous vetting process. He and his technology team work with the manager making the request to assess benefits, costs and risks, and identify alternatives.