CEOs' pay falls, but cash portion of salary rises

Monday, 29 March 2010, 11:07 Hrs   |    5 Comments
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CEOs' pay falls, but cash portion of salary rises
Bangalore: A survey of 81 big companies shows that CEO pay dropped by 8.6 percent last year, however the cash portion of their compensation rose 8.3 percent. This is a sign that companies are de-emphasizing long-term incentives for their top honchos, reports BusinessWeek.

Many shareholder activists argue that CEOs should have a stake in the success or failure of their companies. The value of stock-option grants, which is a much loved tool of incentive compensation, dropped 30 percent last year for the CEOs included in the analysis by Bloomberg BusinessWeek. The survey examined data from proxies filed by companies in the Standard & Poor's 500-stock index by March 12. To get an accurate comparison to the previous year's numbers, the survey included only CEOs who were in the office both 2008 and 2009. The data was compiled by Graef Crystal, a long-time compensation analyst.

Assuming the trend holds for the rest of the S&P companies, it appears CEO compensation may have fallen for the third year in a row. Executive pay peaked in 2000, when average total compensation hit $14.6 million for CEOs of S&P 500 companies, according to research by Carola Frydman of Massachusetts Institute of Technology and Dirk Jenter of Stanford University. Their work shows that pay was roughly 40 percent off that high in 2008.

Some of last year's biggest losers sit atop the 20 financial firms included in the analysis. Overall, those companies cut CEO compensation by $28 million in 2009, accounting for almost 37 percent of the total drop among the 81 CEOs. Eleven were banks that received money from the Troubled Asset Relief Program and had to adhere to federal guidelines that restricted cash bonuses for top executives.

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