Compensation for CEOs at the largest corporations in the United States showed only a moderate increase in 2011, despite improved financial results, according to a review of 2012 proxies filed by 225 Fortune 1000 companies conducted by Towers Watson.
Median annual salaries increased 2.6 per cent for CEOs in 2011, while annual bonuses paid were flat. That marks a reversal from 2010, when salary increases were flat and annual bonuses increased by 21 per cent.
Total direct compensation, which includes salary, annual bonuses plus the grant value of long-term incentives, including stock options, restricted stock and long-term performance plans, increased 5.6 per cent in 2011. That compares with an increase of 14.5 per cent in 2010, said Towers Watson.
The analysis also found CEO annual bonuses began to shift back toward more typical distributions around target levels, compared with 2010. Far fewer companies paid bonuses greater than 150 per cent of target in 2011, while more companies paid bonuses ranging from 100 per cent to 125 per cent of target.
In addition, rising stock prices fueled significant growth in the levels of pay realized by CEOs last year, said Towers Watson. While the target opportunity for long-term incentive grants awarded to CEOs in 2011 rose 5.7 per cent at the median, the value of long-term incentives realized rose 32 per cent.
"Most companies continue to get pay right, which is important as our research confirms that there are significant negative consequences from standing out from the crowd, setting up some interesting dynamics for compensation committees and management," said Doug Friske, Chicago-based global leader of Towers Watson's executive compensation business.
"Clearly, companies are increasingly sensitive to shareholder concerns, and the increased emphasis on performance metrics, goals and the alignment with pay is an outgrowth of that."