Archive for the compensation research Category
Having knocked out CEO and CFO pay, Equilar’s third report in the C-Suite lineup focuses on the S&P 1500′s Chief Operating Officers. While the median CEO and CFO saw their total pay fall between 2008 and 2009, no C-Suite group has taken a hit like that given to COOs, who saw their pay go down in every industry. Even in the Utilities industry, where they’re paid the most, COO pay was down about three percent. Companies seem to be addressing some of the damage by awarding bigger bonuses: the median bonus was up 14.5 percent in 2009, from $350K to $400K. But with more than a third (34.9 percent) not receiving any bonus at all, 2009 hasn’t been a banner year for a good chunk of the COO population.
In general, the COO data for 2009 was consistent with what we’ve seen for CEOs and CFOs: pay down, bonuses up, pay-for-performance fairly intact, and 2009 equity awards making up for the majority of 2008 equity awards that are still underwater. One odd change: unlike every other study, where the first and second quartile of COOs by company performance saw bonus leaps, the second quartile in the COO study actually saw its bonuses go down 7.8 percent, while the third quartile’s COOs saw bonuses that rose 20.5 percent. Sounds like a few companies need to show a little more bonus love to their stronger-than-average performers– and a few other companies need to show a little less love to below-average execs. To request the full COO report, click here.
Reform-minded folk will be pleased at Equilar’s new data on CEO perks for the Fortune 100, which shows the median value of “other” compensation declining 28.3 percent from 2008 to 2009 (compare that to only a 2.3 percent drop from 2007 to 2008). The two most publicly reviled perks, tax gross-ups and personal use of corporate aircraft, were most likely to be cut; 34 percent of companies disclosed cutting at least one perk in ’09, and overall perk prevalence decreased five basis points in 2009.
But that doesn’t mean perks have completely disappeared. 50 percent of CEOs in the F100 still get gross-ups, and flexible perquisite accounts, which more or less shield a disbursement of “other” comp from targeted hatred, are on the rise (as is spending on security fees). 66 percent of CEOs still get to take rides on the corporate jet. All in all, the median perks package for a F100 CEO is still $249,632. The decline in perks may be a sign that Corporate America is listening, but that doesn’t necessarily mean they’re taking drastic action.
Equilar has just released its 2009 pay reports for S&P 400 and 600 CFOs, completing the trifecta begun two weeks ago with the S&P 500 CFO pay study. The most interesting part of comparing the three groups is that cap size has a small effect on CEO pay cuts, but a big effect on bonus increases. To wit:
Pay Decrease for CFOs in 2009
- Large-cap: 3.1 percent ($2.675 million median total pay)
- Mid-cap: 2.7 percent ($1.399 million)
- Small-cap: 0.64 percent ($840,903)
Bonus Increases for CFOs in 2009
- Large-cap: 20.9 percent ($536,250 median bonus)
- Mid-cap: 14.8 percent ($280,000)
- Small-cap: 10.2 percent ($145,457)
See a trend? CFOs of large-cap companies may have taken the biggest total pay cuts (which still weren’t all that big), but they recouped much larger bonus increases as a reward. Were it not for those pesky 2008 option grants, salaries would be flying pretty high. What’s more, this trend also plays out with the upside-downside of good and bad performance: on a percentage scale, large-cap companies’ CFOs see bigger bonus increases when they perform the best and smaller bonus decreases when they perform the worst. Smaller S&P companies may be under less scrutiny, but they’ve somehow absorbed the “pay for performance” rhetoric more quickly than their large-cap counterparts.
If one were to choose any executive hot seat in the S&P 500 right now, the Chief Financial Officer job might be the way to go. Though they make less overall than their counterparts in the CEO suite, CFOs have proven more resilient in terms of avoiding big pay drops and reaping bigger bonuses in these turbulent times. Equilar’s new study shows that CFOs’ median total pay only fell 3.1 percent (versus 7.9 percent for CEOs) while their bonuses jumped a jaw-dropping 20.9 percent (versus only an 8.5 percent boost for CEOs). The industries with well-paid CFOs include Conglomerates (the highest-paying, with median comp of $4.6 million) and Industrial Goods (which saw the biggest pay jump, rising 9 percent over 2008). Strangely, healthcare, the best-paying industry for small-, mid-, and large-cap CEOs, isn’t much of a hotspot for well-paid CFOs; total pay in that industry declined nearly 25% from 2008 to 2009.
CFOs are also benefiting from the same early-2009 stock grants given to their counterparts, where grant size was often inflated to make up for decreased stock price. Over 85 percent of those options are now in the money. To see all the data, request the report here.
The final chapter in Equilar’s cap-size CEO trilogy is out, and it looks like the CEOs of the smallest companies have taken some of the biggest hits. The S&P 600 is the only one of the three groups where bonuses were down in ’09– though median bonus value rose 3.3% for those who got bonuses, over 25% didn’t get any bonus, a 6.6% increase from 2008. Like the S&P 500, total pay is also down for the small-cap CEOs (the S&P 400 rose slightly), by 5.4%.
There’s also the question of stock: compared to their large- and mid-cap peers, small-cap CEOs are less likely to have options and more likely to have restricted stock. The share of their earnings that came in cash also shot up 8% between 2008 and 2009.
Ironically, the small-cap companies seem to be most enthusiastic about implementing the type of strictures to which the government would like to bring their big brothers around. In addition to the increased likelihood of restricted stock, bonuses correlate very strongly with performance for this group, with the top-performing quartile of companies raising CEO bonuses 71.1% and the bottom quartile docking them 32.6%.
You can get more information by requesting the full report here. If you’re interested in the S&P 500 and 400, go here and here.
The Equilar CEO Pay Strategies report, based on 342 companies in the S&P 500, is out today, and regardless of whether you side with the CEOs or the shareholders, it’s a bit of a mixed bag. Median CEO pay declined for the second year in 2009, sliding 7.9% to a median of $7.5 million, but most of that is attributable to the decreased value of equity awards (options are down 17.7%, while stock is down 0.6%). A majority of 2008 awards remain underwater. The lucky CEOs who received their award grants in early 2009, however, have made out very well: their awards, given near the market bottom and often inflated in size to make up for price decreases, have made big gains in intrinsic value.
Since “pay,” ”for,” and “performance” are the three biggest words in Washington right now, we were interested to see the report’s analysis of CEO bonuses based on company performance, which divided the 342 companies into quartiles. CEOs in the top-performing quartile got plenty of bonus love, to the tune of 86.8% increases in their bonus pay, but those in the bottom quartile saw declines of only 10.4% in their bonus payments– can you hear the cries of “what’s the downside” from here?
Thanks to these top performers, overall bonus pay was up 8.5% from 2008, with a median payout of $1.5 million. The percentage of CEOs receiving no bonus at all also decreased, from 18.4% in 2008 to 14.6% in 2009. One sign of the market rebound: the later a company filed, the higher their bonus payment was likely to be; the latest group of filers, in December ’09 and January ’10, saw their bonuses jump 13.3% year-over-year. If the “performance” in “pay for performance” referred to the overall market instead of the individual company, SEC utopia would be imminent.
April, the cruelest month of proxy season, is approaching its end, and in the wake of the numerous filings this month, interesting information is beginning to emerge, such as Equilar’s new report on risk disclosure. The SEC introduced new guidelines for discussion of risk this year, and there was a lot of buzz about how companies would (or wouldn’t) handle the new regulations. The good news is that there seems to be a lot of consensus: of the 100 large ($14.5+ billion in revenues) public companies Equilar surveyed, 72% noted long-term performance goals as a risk-management policy, while 59% cited ownership guidelines and 50% touted clawbacks. Don’t feel badly for those poor NEOs, though: 56% also cited balancing short-term performance goals with long-term ones as important. Not such an important risk-management tool: reducing or eliminating perquisites, which only one of the 100 companies cited.
The landscape isn’t free from disagreement, however. Pension plans were a notable opinion-divider, with some companies touting their employee-retention powers, while others emphasized cutting them to avoid short-term goal focus. It’ll be interesting to see how things normalize (or don’t) next year, when everyone has their peers’ disclosures as a baseline.
Equilar released another round of the latest proxy findings from its CEO Bonus report today, and the picture is looking similar to last time, but with a lot more evidence to back it up. Companies with fiscal years ending in June-November saw a 29% decrease in median CEO bonus payouts, while companies with fiscal years ending in December (now a cohort of over 200) saw a 28.9% increase, with a median payout of $1,450,000.
By industry, financial bonuses were still flat, since last year’s median payout was $0, but consumer industry bonuses soared 116.9% over last year’s numbers, followed closely by the 87.5% rise for basic materials industry bonuses and the services industry’s 40.5% jump. The big losers: capital goods, down 43.9%, and technology, down 30.9%.
The full Equilar Bonus Plan report is now out, and things have changed significantly with the addition of one week of new proxy data. While companies with fiscal year-ends in June-November had a 29% drop in CEO bonuses, those with FYEs in December had a 46.9% increase in their bonuses year-over-year. Our guess is that a lot of companies are beginning to come out of their recession-induced hiding places, and the overall bonus climate at the end of proxy season is looking increasingly rosy for the execs whose fiscal years ended in the past few months. Well, until the next round of media and politicians calling for their heads on a platter begins, anyway. Add to this the finding that financial-industry bonuses jumped from a median of $0 in \’08 to $576,294 in \’09, and the firestorm is practically visible from here.
That\’s not to say that every CEO is making off with beaucoup bonus bucks– 45.5% of them didn\’t take home a dime in bonuses, and as the report shows, many of those who did get a bonus got it in restricted holdings, equity, a mix of cash and equity, or performance-based awarding, rather than time-based. But with unemployment still high and unlikely to drop before proxy season\’s end, these December numbers seem like a bellwether of anti-bonus vitriol to come.
Equilar just released their new article on Say on Pay, which isn\’t available to the general public but can be requested here. \”Say on pay,\” for those who aren\’t aware, is the nickname given to the practice of allowing shareholders to vote on proposed executive compensation packages.
There were a couple of key findings in the report. The first was that large-cap companies are about four times more likely to undergo some kind of say-on-pay process than their mid- and small-cap counterparts. There are a few possible reasons for this: the companies involved in TARP, which requires say on pay, are all large; the bailout brought attention to the pay practices of other large companies; executives of larger companies tend to make more, and therefore attract more scrutiny. Regardless, large-cap companies should be particularly aware of the explosion of say on pay among their peers in size.
The second major finding was that shareholder proposals for say on pay flagged in comparison to advisory votes: only 22.3% of shareholder proposals succeeded, while 100% of advisory votes did. Shareholder sentiment may be able to float the idea of instituting say on pay, but that doesn\’t mean that the vote will end in favor of the investors.
In this highly-charged environment, it can sometimes help to set your own terms before they\’re set for you. Four companies in the S&P 500 sought to avoid shareholder discontent by instituting their own say-on-pay policies.
The Obama administration has noted that it would like the SEC to institute say on pay for all the corporations it oversees, but such a decision would require Congressional approval, a goal that\’s increasingly difficult in the entrenched environment that\’s arisen of late in both parties. It should be interesting to see how the future of this regulation plays out.
