|
Leaders
of major US corporations pocketed smaller pay packages last year
than at any time since 1989, reports a survey on CEO salaries
Reduction
in the remuneration of CEOs mirrors similar slumps in many companies’
fortunes, according to an analysis of 100 concerns’ latest
proxy statements by New York pay consultants William M Mercer. Salaries
and bonuses of surveyed chief executives dropped a median of 2.9%
to $1.24 million. That is largely because 59 companies slashed or
omitted their leaders’ bonuses, which often are linked to profitability.
Corporate profits sank a median of 13%, the Mercer study found.
Meanwhile,
the CEOs’ median total direct compensation fell 10.2% to $2.16
million. That includes salary, bonuses, gains from stock-option
exercises, long-term incentive payouts and the value of restricted
stock at the time of grant. The decreases mark the first such declines
in the 12 years of big-business chiefs.
The
Mercer analysis, mainly covered corporations whose fiscal 2001 ended
before December 31. In the wake of Enron Corp’s collapse last
December, heads of certain underperforming concerns have come under
considerable attack for making big bucks while their investors and
rank-and-file employees suffered. The new Mercer study suggests
this phenomenon may be less widespread than popularly believed.
“As
the companies that didn’t perform well, the CEOs got significant
cuts,” observed Peter Chingos, head of Mercer’s US compensation
practice in New York. “The relation between pay and performance
is pronounced,” he continued. “This is the tightest relationship
we’ve ever seen.” Thus, he noted, the significant fall
in chief executives’ total direct compensation “is very
much a function of the (depressed) stock market.”
Equally
important, Chingos added, are signs that the moderating pay trend
continues. Take option awards, for instance. CEOs in the new study
got a median of 250,000 options with a face value of $7.2 million.
(Face value is computed by multiplying the number of options by
the market price at the time of the grant.) That is up slightly
from a median of 207,100 options with the same $7.2 million value
awarded the 350 chiefs covered in the prior year’s complete
survey. The findings show that corporate boards aren’t substituting
options for business leaders’ missed or diminished bonuses,
Chingos observed. The Mercer analysis revealed no evidence of damped
enthusiasm for so-called megagrants of options, however. An option
megagrant has a face value of at least eight times an individual’s
salary and bonus. About 28% or 24 of the 85 businesses bestowing
options last year handed out the hefty helpings. By comparison,
22% (or 68 of 306 concerns) did so in the year-earlier full study.
Despite
megagrants’ increased prevalence, truly whopping ones have
become less common, Mercer analyst Steve Sabow reported. “You’re
not seeing every other company granting options (worth) 80 times
annual compensation,” he said.
---www.hrhub.com
|
