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.
Perquisites have been a lightning rod in the exec comp debate, and many companies are knocking them out altogether in an attempt to avoid criticism, as a Wall Street Journal article reports today in conjunction with their CEO pay study. Gross-ups were the biggest targets, with many CEOs seeing them cut or eliminated altogether. But some CEOs have avoided the perks axe: William Ford Jr. of Ford Motor Co. got a $900,000 bump in his security payouts over the past two years, presumably based on threats from auto-bailout naysayers (though Ford claims it’s a revision in how they report these figures).
Clawbacks also got some attention in the Journal piece: those who stay abreast of exec comp trends will remember that they rose from around 12% of the Fortune 100 in 2003 to a new high of 72.9% in 2009.
Expect plenty of pot-stirring next week in the aftermath of the New York Times Top 200 pay study, which is based on Equilar data and will be released on Sunday.
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%.
Dan Walter has a great new interview with Equilar CEO David Chun up at the EC Experts blog, primarily focused on the upcoming Executive Compensation Summit. There’s lots of interesting details here, from the industry-consultant tag-team roundtables to the educational forum WorldatWork will be holding for those looking to rise in the exec comp universe. It seems like there will be plenty of networking opportunities, as well as a focus on solutions, and the company is offering a $200 discount through mid-April.
Check out the interview, then see more details at the official Summit website.
The biggest season for equity grants, December-February, has wrapped up, and Equilar is comparing the Form 4 filings of S&P 500 CEOs to the same time last year, with some interesting results. The percentage of CEOs receiving no equity grants at all rose from 53 percent last year to 60.8 percent this year, surprising given the combination of the market rebound and lowered performance goals in recent months. It\’s possible that some of this is from companies shifting their grant periods, but that still leaves some CEOs out in the cold.
For those who got bonuses in both years, grant sizes went down, but the market\’s new life caused values to go up, making the difference from last year essentially a wash: overall value rose about 0.5 percent. Also, companies seem to be shifting away from stock or stock/options mixes to pure options. (Yes, it\’s the SEC\’s favorite game show: Pay for Performance!) It should be interesting to see if this trend holds as we continue our journey into the heart of proxy season. Check out the report here.
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.
The advance teaser for Equilar\’s 2010 Bonus Plan Design report is out today, with plenty of statistics that should cheer populist revolutionaries and disappoint current or wannabe captains of industry. Total CEO bonuses fell 21.9 percent in FY 2009, though the numbers still aren\’t small: median bonus pay was a rather hefty $689,000 in 2009, though it was an even steeper $882,105 in 2008.
Unsurprisingly, the financial industry, much of it under TARP\’s house rules, took a big knock in the report, with median payouts declining 51.1 percent. The technology industry, however, took the dropoff crown: their bonuses fell 59.2 percent. The only unscathed industries were healthcare, which posted a 14.7 percent gain, and services, which posted a 20.8 percent gain.
So bonuses are definitely down, but hey, it could be worse: you could be one of the 26.1 percent of CEOs who received not a penny of bonus money in 2009. Yeah, we know. World\’s tiniest violin. But that\’s an 8.3 percent rise from 2008, which is pretty sizable.
At the end of the day, close to three-quarters of CEOs are still getting bonuses, most of them far larger than an average American\’s salary. But no matter how you feel about the President\’s and the SEC\’s position on the matter, you have to admit that their pressure is working– for the moment, anyway.
Request the full report here.
While a major post-recession trend has been the shifting of stock option grants to restricted stock, many Silicon Valley executives are still getting a fair amount of options, according to today\’s Wall Street Journal. Oracle\’s Larry Ellison leads the pack, with a whopping $57.4 million of options awarded in 2009. That\’s more than seven times the options granted to #2 on the list, Cisco CEO John Chambers. (We see many more yachts in Mr. Ellison\’s future.) Oracle also led the pack in total option grants given to executives, by a pretty wide margin.
In the third-place slot was NetApp, which awarded $7 million in options to new CEO Thomas Georgens. This is at least partially attributable to the new contract it had to work out when Georgens was appointed to the slot. Either way, it seems to be evidence that for some of the biggest Valley firms, restricted stock isn\’t looking as necessary anymore.
One of the big conclusions drawn by Equilar in their 2010 General Counsel Pay report was that GCs who report to the CEO make significantly more than their counterparts who don\’t. Rees Morrison examined this disparity, and came up with a few theories:
- Direct reporters are more likely to be older, have more experience, and therefore, command a higher salary.
- Direct reporters may lead numerous functions, while non-direct reporters may only lead one or two.
- A hierarchy has emerged in big corporations: one out of three GCs are non-direct reporters, meaning that they\’re at least one rung below someone else, and therefore paid less.
These facts may be cold comfort to the GC who\’s making significantly less than his or her directly-reporting counterpart. If that\’s the case, they may want to keep in mind an Equilar finding from last year: CEOs promoted internally tend to make less than those who switch companies to become CEO. If this also holds true for the GCs who directly report to them, a job change might start to seem like a good idea.
