Reining in pay packages: though many executive pay packages will shrink this year, experts agree that--no matter what the industry--high-performing chief financial officers will always be in demand.

• Author: Raab, Marian

First, the bad news: The global financial crisis and economic downturn have created some of the most intense scrutiny and pressure on executive compensation ever seen in American corporate history.

"Companies must assume their top executives' compensation will come under greater scrutiny from within and without," says Linda Barrington, research director of The Conference Board Inc. "The financial market crisis and U.S. recession have contributed to eroding public trust in business leadership," she says.

Various factors outside of executives' control will impact compensation packages going forward, including the economy, the stock market and regulators. To be sure, these factors have always been in play when it comes to senior-level pay packages--but not at the current level of intensity.

"We will see some real changes in the structure and level of C-suite pay across the board this year," says Melissa L. Burek, a principal in Executive Compensation at global consulting firm Mercer LLC.

Mark Anderson, president of ExecuNet, a business and career network for senior-level executives, was more blunt on what the immediate future holds, saying: "Pay packages are going to shrink."

But there is some good news: Industry experts agree that--no matter what the industry--high-performing chief financial officers will always be in demand. After all, a public company may be forced to cut manufacturing or travel expenses, but it still has to produce financial statements.

And the economic downturn could actually give private firms an advantage in structuring more competitive pay packages that would not be possible in a roaring stock market environment, say industry experts.

"Finance department jobs are probably a little bit safer and frankly, some companies use the downturn to upgrade their staff," says Paula Todd, the head of research and managing principal at Towers Perrin, a global professional-services firm.

CFO Pay Trends

Before the financial meltdown began last year, CFO pay packages were rising, according to Mercer, with the increases actually outpacing those of other C-suite executives. Though CFOs still lagged chief executive officers and chief operating officers in terms of average compensation, their packages were gaining.

The median total direct compensation for CFOs (base pay plus short-and long-term incentives) rose 5.4 percent to $2.3 million in 2007. Meanwhile, that figure for CEOs fell 1.4 percent that year to $7.3 million and COOs decreased nearly 2 percent to $3 million.

CFOs saw the steepest rise in actual short-term incentives in 2007, with an average gain of 11.5 percent (to...