Benefits February 1, 2002

Pay for Three Quarters of CEOs Drops in 2000

February 1, 2002 (PLANSPONSOR.com) - In what Watson Wyatt interprets as a sign that more companies are tying executives' pay to corporate performance, the median chief executive officer's pay dropped 32% in 2000 to $1.3 million.
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Watson Wyatt’s latest executive compensation study of CEOs at more than 1,350 large publicly-traded companies, found that almost three-quarters of CEOs’ pay fell during 2000. Only a small group who had exercised options in 2000 saw a big gain, according to Watson Wyatt.

That’s not all. When 2001 payroll data is available, Watson Wyatt researchers said they expect it to show a further compensation decline and would represent the first time in more than 15 years when executive pay dropped two years in a row.

The study also found that shareholder returns were significantly higher in companies with higher levels of executive stock ownership.

Companies with high CEO ownership provided a 20.7% return to shareholders at the end of 2000 while companies with low ownership levels saw no return to shareholders.

Broader Management Pay Study

In a companion Survey of Top Management Compensation, Watson Wyatt examined executive pay levels and recent pay trends at more than 1,700 companies.

The study found:

  • Companies paid their highest managers more in total cash compensation in 2001 (up 10.3%) than base salary (up 6.2%). Watson said that meant companies put greater weight on performance-based cash compensation.
  • In 2001, 16% of all employees were eligible for stock options.
  • The average grant value of stock options to CEOs increased to $4.3 million in 2001, from $4.0 million in the prior year.
  • The percentage of companies with stock ownership guidelines for senior management has leveled off in the past few years, at about 26%.

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