IT Officers

The role played by Information Technology Officers is changing rapidly as demand for business-oriented IT leaders rises. Managing IT as a black box/cost center is no longer an acceptable approach - tomorrow’s IT officers need to be both business and technology leaders. Beyond driving efficiency and cost reduction, companies want greater leverage of their immense investment in IT; they expect technology to improve business performance and drive revenue generation opportunities. With technology competing for scarce resources, senior executives expect their IT leaders to be able to develop and defend a business case for investment with a quantifiable ROI.

Given this changing landscape, the role of CIOs and IT executives in general has dramatically shifted, along with the skills and competencies required of them. Although CIOs are an emerging presence in the executive suite, few IT executives have the business qualifications or capitalist's killer instinct for making money. The small number of IT leaders that do possess such entrepreneurial skills consequently command hefty compensation packages.

Entrepreneurs earn more

Top CIOs hired by Fortune 50 companies can expect to earn salaries starting at USD 400,000 and totaling over USD 1 million including bonuses and other perks. Hewlett-Packard recently offered an estimated USD 7-10 million to lure CIO Randy Mott away from Dell, although such bids are rare. More typical is a base salary of around USD 300,000 plus bonuses amounting to 40-60% of pay, depending on the extent to which compensation is tied to business performance.

This can be hard to achieve in IT because the technology has to work, leading most firms to see IT as a cost. The exceptions tend to be companies where IT is the business, like at an Amazon.com Inc., for example, or at one of the large tech companies, where the CIO is truly viewed as a strategic force in the business and pay packages include significant equity.

Will CIO pay come under fire?

Excessive pay packages for U.S. CEOs have already started to anger investors. Are CIO earnings next in line to attract public criticism? This is unlikely due to the lower visibility of CIOs in general and the relatively modest average salaries paid to IT leaders. According to a recent compensation survey, average pay packages rose by only 3.1% in 2007 versus 2006.

The largest companies, and certain sectors such as financial services, tend to pay the most, with incentives totaling up to 50% or more of earnings for CIOs more closely aligned to business performace. CIO pay could face public scrutiny if it were to rise in combination with significant outsourcing and staff layoffs, or if there were a major security breach; but such cases would likely lead to the dismissal of the CIO, rather than shareholder activism.