A news release from the Portland, Maine-based firm said that the average increase in this year’s survey was 91%, driven by 27 CEOs receiving compensation over 1,000% greater than their previous year’s pay.
The survey shows a median increase in total compensation of 30.15% between fiscal 2003 and fiscal 2004, compared to an increase of 15.04% in last year’s survey, and a rise of 9.49% in 2002.
The survey further found that total annual compensation increased by a median of 11.77% between fiscal 2003 and fiscal 2004. This smaller increase is evidence that long-term incentives such as restricted stock and profits from stock options are fueling the large increases in total compensation.
A special study to test whether the highest compensation increases in the S&P 500 were tied to company performance showed that the largest percentage increases in total compensation had very little connection to long-term value creation where the more moderate percentage increases in total annual compensation generally reflected positive changes in year-on-year company performance.
According to the survey, six of the ten companies whose CEOs received the highest increases in total compensation underperformed their peers in stock price appreciation over the previous five years.
“The year may change but our analysis of compensation practices shows that runaway CEO compensation is as unstoppable as ever,” said Paul Hodgson, Senior Research Associate with Board Analyst, in the news release. “CEO compensation is one of the most visible and telling indicators of the effectiveness of corporate governance but our findings have yet to show an overall improvement in pay practices despite the continued high level of public attention, calls for restraint, new exchange listing rules, new director independence requirements and new best practice statements.”
The full survey is based on a sample of the top 2,042 US companies as measured by market capitalization. All compensation analysis is based on full-year figures taken from the latest available proxy statements through June 2005. Proxy filing dates ranged from July 1, 2004 through to June 28, 2005. Over three-quarters of proxies were filed in 2005.
More information is at www.thecorporatelibrary.com .
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