Executive compensation declining

Study finds CEOs at top 50 U.S. companies saw 16-per-cent fall in compensation

In the face of a slowing economy and weakening corporate performance in the United States, total direct compensation for chief executive officers among many large companies is declining, according to Mercer’s study of CEO compensation trends, based on analysis of the latest proxy filings of 350 Fortune 1000 companies.

Median total direct compensation was defined as base salary, short-term incentive compensation and expected value of long-term incentives granted in the fiscal year covered by the proxy.

For CEOs of the top 50 companies, compensation for 2007 was just under $14 million (all numbers US), a 15.8-per-cent reduction from 2006. Those at large companies received $9.4 million, unchanged from 2006, while CEOs of mid-size companies earned $4.7 million, a decline of 4.6 per cent.

Only 58 per cent of organizations increased base salary.
“Companies are taking a hard look at the drivers of long-term economic value, re-assessing performance metrics and realigning variable compensation with financial, strategic and operational measures instead of more traditional metrics such as ‘earnings,’” said Mike Halloran, a senior executive compensation consultant at Mercer.

Long-term incentives — primarily in the form of equity — make up just under two-thirds of the total CEO pay package. And long-term incentives (cash and equity) awards based on achieving specified performance goals have become almost as common as stock options.

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