How CIOs Reach the Top

Every year, senior managers participate in a corporate beauty contest—and few technology executives make the final list.

A Baseline analysis finds that only 37 chief information officers ranked among the highest paid officers of Fortune 500 companies in 2001.

Though that's 14 more than in 2000, it's still a skimpy lineup—7% of the 500 largest publicly traded companies in the United States. And in general, technology executives who did make the list got paid less last year than the year before.

Baseline's list is culled from proxy statements filed by companies that must inform their shareholders before their annual meeting who their five highest-paid officers are.

The Securities and Exchange Commission requires that disclosure, along with the names and titles of those executives. Chairmen and chief executives always make the proxy. Chief financial officers rarely miss. Who fills the other slots—whether from marketing, sales, technology or other top functions—says a lot about what a company values.

Richard Chapman, CIO at Kindred Healthcare, is the highest paid executive in the Baseline ranking, with $2.5 million in compensation for 2001.

He succeeds Leslie Tortora, the long-time CIO of securities brokerage Goldman Sachs, the highest paid for 2000 with $9.4 million in salary and bonuses. She took herself out of the running by retiring.

Chapman helps Kindred Healthcare run a $2.3 billion national network of hospitals, nursing homes and pharmacies. He must keep track of Medicare and Medicaid reimbursements, which provide 70% of Kindred's revenues.

Kindred, based in Louisville, Ky., entered Chapter 11 bankruptcy protection in 1999 to restructure debt. Kindred came out of bankruptcy in April 2001 and posted $52 million in profits for the year.

San Francisco-based Wells Fargo, which has the No. 2 CIO in Baseline's ranking—C. Webb Edwards, who earned $1.6 million—is a company long regarded as a technology innovator. At No. 3 is Thomas Whiddon, CIO of Lowe's Companies, a $22.1 billion chain of home improvement stores based in Wilkesboro, N.C., that is second only to Home Depot. Whiddon, who has been at Lowe's for six years, received $1.4 million last year.

CIOs in general didn't see the same level of riches in 2001 as in 2000. The lion's share of most multimillion-dollar compensation packages are stock awards tied to company performance. Last year's lackluster economy dragged stock-based bonuses down. Way down.

For example, Fran Dramis, CIO of Atlanta-based telecommunications firm BellSouth, received a bonus of $4.2 million in restricted stock in 2000, but no stock last year. His package dropped from $5.5 million to $1.2 million.

Compensation for the top 10 CIOs as revealed in proxy statements ranged from $1.1 million to $2.5 million in 2001, compared to a range of $1.1 million to $9.4 million the previous year. A few CIOs from last year's list fell off altogether this time around.

Among them, Jean Davis of Wachovia Corp., a banking firm, wasn't there; a shuffling of executives at the bank put several new names in the proxy. Ron Gaston quit Venator Group, the athletic-wear retailer that since has been renamed Foot Locker. Terry Talley replaced Gaston as CIO. Bruce Goodman, of the Humana Inc. health-benefits firm, was displaced by the company's chief financial officer. Bill Seltzer retired as CIO of the office products retailer Office Depot.

Routes to the Top

Of course, getting your name into the proxy is not a definitive measure of CIO stature. Even if you don't make the cut, you still could be one of the top-paid technology executives in the country. For example, a CIO who makes $500,000 at one company might be one of the five highest-paid officers there and would be included in the proxy statement. But at a bigger company, a CIO's multimillion-dollar earnings might be exceeded by five—or more—other top officers.

An analysis of the CIOs in this year's elite 7% can help guide other technology executives to the top.

First, understand that longevity counts. The short tenure of CIOs—typically two to three years—contributes to the field's poor showing. That is, the longer you're at a company, the more likely you are to receive a fat paycheck and bonuses.

Tortora, for example, led technology strategy at Goldman for seven years before she retired in 2001, a 45-year-old multimillionaire. Steve Mnuchin, Tortora's replacement, didn't make the company's latest proxy. He came to Goldman the same year Tortora did, but has spent most of his time in departments other than technology, which he joined in 1999.

Some of the other highest-paid CIOs have been at the same company for many years as well, including Dawn Lepore of Charles Schwab brokerage (19 years), Brian Kilcourse of Longs Drug Stores chain (19 years) and Mike Heschel of grocery retailer Kroger (11 years). (Lepore was promoted to vice chairman of technology and administration in late 2001 and was replaced as CIO by Schwab Executive Vice President Geoff Penney.)

Know, too, that in several industries the top technology executives, even if they are corporate officers, consistently make less than other senior managers. For example, no CIOs appeared in proxies from the biggest pharmaceutical, petroleum, chemical and publishing companies in the U.S.

One more CIO dead zone: diversified financial firms, including American Express, Capital One Financial and Citigroup. The $22.3-billion American Express, for example, is widely regarded as having built a top-notch technology infrastructure. CIO Glen Salow wasn't listed in the company proxy this year, though a vice chairman, the president of the U.S. consumer group and the president of global financial services were, along with the chairman/chief executive and chief financial officer.

That doesn't mean technology isn't important, even critical, to these sorts of companies. But group presidents of geographic areas, heads of research and chief operating officers often occupy the spots that might otherwise be taken by CIOs. Top in-house lawyers and human resources leaders also sometimes end up among the five most highly compensated officers.

By contrast, some industries were favorable to CIOs this year. Electronics companies had seven CIOs listed, and firms in food manufacturing and food retail had six. Health care, specialty retail and commercial banks, each had four. A critical emphasis on logistics and supply-chain issues in these industries—especially in electronics, retail and food—let CIOs shine.

Making the Top-Paid List Avoid some industries. Utility, drug, oil, and diversified financial companies are some of the realms in which other senior executives almost always make more than CIOs Build alliances. Work strategically among other senior managers to become a full partner in setting company's direction Hang tough. Length of time on the job influences compensation and stature Lose the inferiority complex. Confidently change the way the CEO views technology Talk in the other fellow's language. Use business terms to describe your initiatives' accomplishments, not technology jargon Focus on what the CEO cares about. Pick out the company's key business goals and plan a technology project to satisfy at least part of each

Copyright © 2004 Ziff Davis Media Inc. All Rights Reserved. Originally appearing in Baseline.