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The surprising dynamics of CMO pay

New research reveals revenue risks of unequal C-suite compensation.

Isys Morrow

2025-07-15

As the proxy season begins, public companies will soon disclose the salaries of their top executives and the relationship between their compensation and the company's financial performance. With “Say-on-Pay” votes, investors can express their approval or disapproval of the compensation.

A new study suggests they should pay close attention to the relative pay of chief marketing and chief financial officers, where misalignment could signal lower revenue growth in future years.

In their paper “Chief Marketing Officer Pay: The Revenue Growth Consequences of Employing Internal and External Benchmarks,” published by the Journal of the Academy of Marketing Science earlier this year, Michael Wiles, associate professor of marketing, along with colleagues Hui Feng of Iowa State University and Kimberly Whitler of the University of Virginia, found that companies may be using the wrong benchmarks for incentivizing their CMOs to drive firm income higher. Leaders can improve morale and prevent erosion of the bottom line by adjusting their compensation strategies for employees.

Understanding relative compensation

To determine the salary of CMOs and other top executives, companies typically employ the same framework they use for the CEO: Learn what peer firms pay for the role and use the median as a benchmark.

It makes sense at first glance. After all, if you offer a salary too far below average, you're likely to draw fewer — and less qualified — candidates. Offer an amount too far above the norm, and you could be overspending or taking dollars away from employee salaries, benefits, and perks.

But while it may work for CEOs, using an outside comparison is a less effective way to set CMO pay, the researchers found. After analyzing more than 20 years of data from 457 public U.S. firms, they learned that when companies make CMO salaries commensurate with their CFO — instead of using an outside median — firm revenue continues apace. However, if the company pays the CMO less than its CFO, firm growth suffers.

Why would this happen?

Behavioral psychologist J. Stacy Adams' 1963 equity theory suggests that people are motivated by a sense of fairness in their work, and can lose motivation if they feel undervalued compared to those in similar roles.

As the head of the company, a CEO's role is unique, so feeling undervalued within the firm is not an issue. However, the researchers suggest that when CMOs are aware that the company pays them less than the CFO they work closely with they may become discouraged and less motivated — if the CMO perceives pay unfairness due to their relative contribution compared to the CFO. Over time, this translates to diminished effort and lower performance, impeding the CMO's ability to generate greater revenue for the firm.

That doesn’t mean CMOs who make less than peers are slowing down deliberately.

“It's most likely an unconscious process,” Wiles says. “C-suite executives are highly motivated and engaged. But we're all human, and when we're in a situation of perceived inequity, our nature is to do less, perhaps to put the relationship in balance.”

Though the study does not provide specific evidence of inequitably paid CMO demotivation, it accounted for a host of other variables that could have affected revenue results, including a firm’s marketing intensity, research and development intensity, overall market growth, and industry competitiveness, as well as individual factors such as CMO gender, length of tenure, and responsibilities. The CMO/CFO pay ratio consistently stood out as a key determinant of revenue.

“The evidence is clear: The lower the CMO is paid compared to the CFO, the lower the firm's revenue growth rate,” Wiles says.

The researchers also examined the CMO's salary in relation to the firm’s highest-paid C-suite executive, not including CFOs. While they found similar correlations, they weren’t as strong as that between the CMO and the CFO, likely because CMOs see the CFO's role as the most closely aligned with their own. When the researchers asked 42 CMOs to assess how relevant their pay is to that of other top executives, the CMOs judged CFOs to be the most pertinent. Other studies have found similar results.

Working toward parity

What should companies do to keep their CMOs motivated? Pay them more than the CFO? Or would that shift unconscious resentment and lead to a vicious circle of “Who's making more now?”

The study suggests this tactic wouldn't work, at least not to increase firm revenue.

“We see no benefits to revenue when the CMO/CFO pay ratio is more favorable to CMOs,” Wiles says.

Again, psychological factors could be the reason.

“When you have conditions of high compensation, people tend to believe it's justified. They feel their compensation is fair and appropriate, not that they are being unduly rewarded, and should work harder to make up for it. But when people perceive inequity, it affects motivation, and their level of input changes.”

The study's findings suggest that CMO/CFO compensation parity would best benefit the bottom line, and if that’s true, companies may be moving in the wrong direction. A graph included in the study shows that salaries for all C-suite professionals steadily rose from 1993 to 2020. However, in the last two years of that period, CFO salaries rose and remained at that level, while CMO salaries declined for both years, increasing the pay disparity between the roles.

Next steps

The study focused on CMOs, but Wiles says it would also be helpful to learn more about the pay of other top executives. Researchers could survey CTOs, CIOs, and others to determine which C-suite role they consider the primary referent for their salaries, and whether discrepancies between the two have a similar effect.

In the meantime, here's a tip from Wiles to consider before sending in your Say-on-Pay vote:

“Look at the ratio of CFO to CMO pay and learn how it’s changing over time. If the negative pay gap for CMOs increases, the firm will likely have lower relative growth in the future. Conversely, if CMO pay is becoming closer to that of the CFO, but is not above it, the firm’s relative growth is likely to be higher than people expect.”

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