CEO Pay More in Sync with Co. Performance

April 10, 2006 (PLANSPONSOR.com) - A survey from compensation consultants Pearl Meyer & Partners suggests that compensation for CEOs of major US companies moved more in line with corporate performance in 2005.

CEO pay rose 10% to a median of $8.4 million in 2005, according to a press release on the survey conducted for The New York Times. Growth in executive pay saw a 15% increase in net income and a 6% rise in total shareholder return among the 200 companies studied, the release said.

Bonuses paralleled more modest corporate growth, up 7.7% to $1.8 million. Median salary was up 3.8% to $1 million.

Jan Koors, Managing Director of Pearl Meyer & Partners, noted that investors’ interest in the quality of pay-for-performance plans will be further increased by the expected introduction of new Securities and Exchange Commission (SEC) disclosure rules for 2007 (See SEC Unveils Proposed Exec. Comp. Disclosures Mandate ).   

Koors pointed out that the SEC clarified that all executive benefits and perquisites, such as use of corporate aircraft, vehicles and lodgings, even when not considered income, must be disclosed. The survey found that, with many companies including those numbers for the first time, the median value of “other” compensation jumped 13.5% to $188,173. “The increase in perquisite values is a preview of the changed look we can expect of executive compensation under the new SEC rules,” Koors said, in the release.

CEO compensation programs in 2005 also saw a third straight decline in stock option values, down 1.4% to $2.1 million on top of a 7% decrease a year earlier. At the same time, there was a 15% rise to $1.9 million in the value of stock awards and long-term performance plans. Companies have steadily moved away from granting stock options since the Financial Accounting Standards Board adopted its options expensing rule (See Stock Options Cut in Response to FAS123 ).

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