Corporate CEO Bonuses and Equity Comp has Strong Growth

April 5, 2007 ( - The nation's largest company chief executives saw their annual bonuses jump 13% and the value of their equity-based compensation holdings increase by almost 50% in 2006, a new study has found.

A Watson Wyatt Worldwide news release about the proxy statement study found that median annual bonuses for CEOs increased 13% to $2.2 million last year. At these same companies the median growth in earnings per share was 14%.

Base salaries also grew by a more modest 4% to a median $1.1 million.

The proxy analysis is based on 92 large companies whose CEOs remained in their positions in 2005 and 2006, according to the announcement.

“Corporate America enjoyed a banner financial year in 2006,” said Steve Van Putten, a senior executive compensation consultant at Watson Wyatt, in the news release. “CEO pay moved in step with corporate earnings and stock prices, reflecting the trend toward performance-based compensation.”

The analysis also found that the median value of CEOs’ equity compensation, which includes in-the-money stock options and restricted stock awards, increased 48% last year to $30.2 million. This was fueled in part by the 18% increase in total returns to shareholders (TRS) last year.

For CEOs at high-performing companies with a median 30% TRS, equity compensation nearly doubled last year to $31.3 million, while CEOs at low-performing companies (7% TRS) saw their equity compensation increase by 13% to $25.3 million, Watson Wyatt said.

“The correlation between realizable pay – the value of outstanding long-term incentives granted to executives over a specific time frame – and company performance remains as strong as ever,” said Ira Kay, global director of compensation consulting at Watson Wyatt. “It is also a good reminder that, because stock options are highly leveraged, even a small increase in stock price appreciation can lead to an increase in value for other CEOs.”