Major-League CIOs

Proxy reports show that these IT execs have made it big, with salaries and bonuses that put them in the corporate elite.

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A young field compared with finance and operations, IT has climbed the corporate respectability scale in recent years. But not everywhere.

Just 46 of the Fortune 1,000 companies rank and pay their CIOs on par with the very top corporate officers, according to an exclusive Computerworld study.

This despite the corporate rhetoric that a business is only as good as its IT.

The Securities and Exchange Commission (SEC) requires companies to report in annual proxy statements the compensation of their CEOs and the next four or five most highly paid officers. Computerworld ranked the CIOs included in the latest proxies for the 1,000 biggest companies in the U.S.

Star treatment for the 46 elite CIOs includes fat retention bonuses, car allowances, low- or no-interest loans and lucrative stock

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CIOs describe life at the top

Two high-powered CIOs -- Brian Kilcourse and Wayne Sadin -- talk in separate interviews about what it takes to set strategy with the CEO.

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packages. There are several millionaires in the group. And at least 16 CIO heroes made more than the chief financial officers at their companies last year, signaling that IT at those companies has lost its cost-center stigma.

Still, the fact that less than 5% of Fortune 1,000 CIOs made the proxy statement "means the CIO isn't of the stature everyone thinks he is," says Victor Janulaitis, CEO of Janco Associates Inc., a management consulting firm in Park City, Utah.

Even among the big-league CIOs in the Computerworld ranking, 29 - more than half - made less last year than the CFOs at their companies.

More companies than ever demand that CIOs help set strategy and make business goals come true. But that authority isn't always reflected in the executive order, says Wayne Sadin, CIO at Bank United Corp. in Houston.

"There are barnacles encrusted around the thought processes at companies," says

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Chief Internet Officers: A Fad About to Fade

At a few companies, the CIO is outranked and outearned by an Internet executive.

For example, AdvancePCS, a managed-care company in Irving, Texas, didn't include a CIO in its latest proxy statement. But the "vice chairman of e-business and technology" did show up.

First Union Corp., a bank based in Charlotte, N.C., actually eliminated its corporate CIO position last October. It then appointed David Carroll, a former regional bank president, to chief e-commerce and technology officer. Carroll made the latest proxy.

Though there were fewer instances last year than in 1999, various versions of the Internet officer position live on. But for how long?

"Pardon my French, but that [title] is a bunch of B.S.," says Victor Janulaitis, CEO of management consulting firm Janco Associates.

The positions are a fad destined to fade, Janulaitis says. "There will be a new 'chief something' in two years, and the chief e-commerce officer will get absorbed."

That's already begun. For example, Maryann Timon was senior vice president of Internet strategies at Genesis Health Ventures Inc. in Kennett Square, Pa. But the elder-care company didn't directly replace Timon after she retired in March 2000. Instead, it distributed her duties among other managers.

At least one e-commerce executive has moved up to a bigger, better spot.

Steven Mnuchin was global head of e-commerce at Goldman Sachs until February, when "co-CIO" was quietly added to his title.

At the same time, the company's existing CIO, Leslie Tortora, gained Mnuchin's e-commerce title in addition to her own.

They now have the same titles, but Goldman Sachs declined to comment on whether Mnuchin's compensation will match Tortora's, who holds the No. 1 ranking on the Computerworld list.

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Sadin, who is ranked No. 14 and reports to the bank's CEO. "I consider myself very lucky."

Five of the top 10 CIOs come from financial services firms, an information-intensive field that often leads IT trends. "Hopefully, they will pull others along," says Patricia Wallington, president of CIO Associates, a consulting firm in Sarasota, Fla.

She says the individual is what matters most in whether a CIO can make the top echelons - not so much any corporate philosophy on the value of IT. When a long-standing, top-ranking CIO quits, his successor doesn't automatically get comparable status or pay.

For example, in 1999, Robert Logan, then 62, retired as CIO at J.B. Hunt Transport Services Inc., a $2.2 billion trucking company in Lowell, Ark. But his replacement, Kay Palmer, then 36, didn't get the same status. Logan was an executive vice president; Palmer is one rung down as a senior vice president. Palmer didn't make the company's latest proxy, either.

Seniority, style of communication, mind-set, breadth of viewpoint - these are as important as knowing how Unix works or how to negotiate with Microsoft Corp. "You don't want to sit in a board meeting and make picky little techie comments," says Wallington, the legendary former CIO at Stamford, Conn.-based Xerox Corp.

There's a difference between a boardroom-caliber CIO and an IT manager. "The IT person often thinks that when the project is done, IT is done," says John Boushy, CIO at Harrah's Entertainment Inc. in Las Vegas (No. 8 on the list). "When I was solely looking at things from an IT perspective, I'd be frustrated from time to time about why IT wasn't more respected."

Boushy, 46, has been at Harrah's for 22 years. He started in IT, then spent four years as a special strategist to the chairman and another seven in high-level marketing. His time outside technology, he says, taught him how to be an executive-suite CIO.

"People at a senior level take responsibility for project outcomes. They hold themselves accountable to whether the business improves," he says. "A CIO has to do that."

The transition creates a "constructive schizophrenia" at work, says Chris Miller, an executive director of the Corporate Executive Board Co.'s Working Council for CIOs, a management research group in Washington.

CIOs who are also senior officers help shape corporate strategy, but the old rules of better, faster, cheaper still apply. The best way to satisfy these sometimes competing interests is to install a standard, companywide IT infrastructure, Miller says.

Yet such projects are long and hard and tend not to have much support from business-unit managers, he says. "This is why CIOs want representation at the executive table," he says.

How did Sadin at Bank United know he had arrived? "When I saw my name and picture in the annual report. That was a big deal - and when you see yourself in the proxy," he said.

With higher stature come higher stakes. Once the CIO starts to pitch IT plans that influence the direction of a company, what goes right and wrong is much more obvious.

"What drives a lot of folks is fear of failure. I've never sat back and said, 'I've made it,' " says Bill Friel, 62, CIO at Prudential Financial in Newark, N.J. "If there's a job in American business with more pressure on a day-in, day-out basis and year over year, I don't know what it is."

Top-tier CIOs also feel some vulnerability in their paychecks.

Between bonuses and stock options, well over half the pay package of top CIOs is linked not only to meeting individual and IT departmental goals but also to company performance. Did the stock price rise? Did expenses fall?

"That's appropriate," says Brian Kilcourse, 49, CIO at Longs Drug Stores Corp. in Walnut Creek, Calif. (No. 20). "I'm willing to be measured on the success of the company. You'd be amazed at how focused you get."

Al Gula, 46, CIO at Franklin Resources Inc., a San Mateo, Calif.-based investment firm, agrees.

Gula (No. 5) says more than half of his pay is tied to company performance. "If Franklin doesn't do well, my compensation can drop dramatically. We all work for the shareholder at the end of the day," he says.

CIO pay at this level can vary a lot from year to year, depending on how and when long-term incentives are bestowed. For example, Kilcourse will make $115,000 less this year than last year, according to company proxies, mainly because he'll be getting fewer stock options.

St. Louis-based D&K Healthcare Resources Inc. has a complicated formula for figuring stock awards for CIO Brian Landry (No. 44). He receives a certain number of shares based on where D&K falls in an annual health care company rating index.

John Lochow (No. 26) joined Tech Data Corp. in Clearwater, Fla., as CIO in February 1998. He was eligible for a $300,000 bonus simply for staying with the company until last June.

Overall, the go-go economy of the past two years helped create some CIO jackpots. But this year won't be as rosy.

No. 1-ranked Leslie Tortora at The Goldman Sachs Group Inc. last year received a $6.9 million bonus, more than 11 times her comparatively modest salary of $600,000.

Tortora, 44, is regarded as one of the most talented CIOs in the field, and her compensation reflects that. What's more, it is - to the dollar - equal to that of Goldman's CFO.

At the same time, the New York-based investment bank, which handled dozens of dot-com initial public stock offerings, made billions of dollars in profits in 1999 and 2000. That also boosted Tortora's pay.

Tortora was unavailable for comment.

But this year's economic slowdown means that many CIOs will see a drop in pay, says Janulaitis.

When sales and profits fall, bonus dollars that might have gone to senior officers instead typically become retention bait for lower-ranked employees.

"This is the first recession we've gone into where CIOs are viewed as part of senior management," Janulaitis says. "They've gotten what they've wished for. Because of that, they're going to be paying the price in this downturn."

Dawn Lepore, CIO at The Charles Schwab Corp. in San Francisco, had a great 2000. Her $1.6 million bonus was three times her $522,000 salary.

In January, though, Schwab cut the salaries of its senior managers, including Lepore, 10% to 20% for two months, citing the sour economy. But to 47-year-old Lepore (No. 4), the move made sense.

"Compensation of executives should be aligned with the interests of customers and shareholders," she says. "If the economy shifts, is that fair? I don't think about it that way."

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