|
|
|
|
|
Profit performance pays
Study shows over 500 companies hold CEOS accountable
NEW YORK -- Despite widespread condemnation and recent stories regarding Chief Executive Officer compensation, a comprehensive study of over 500 companies by executive compensation consultants Steven Hall & Partners finds that most Boards are committed to holding CEOs accountable for performance in both good and bad times.
In depth analysis of more than 500 CEO bonuses reveals that top-performing companies, where net income rose 77 percent last year, awarded bonuses that were 25 percent higher than the prior year. In contrast, median CEO bonuses fell by 73 percent at companies with bottom quartile performance, where the median net income dropped by 56 percent. Thirty-two percent of these bottom dwellers were sent an emphatic message -- their Boards paid no annual incentive at all to their CEOs.
"It is heartening that these Boards are holding executives' feet to the fire. We work with Boards to ensure close correlation between company performance and incentive awards, and it appears that these programs are working exactly as intended," commented Steven Hall of Steven Hall & Partners. "We have come a long way from the old days of 'pay for pulse,'" he added.
Like their CEO colleagues, annual incentives awarded to Chief Financial Officers (CFOs) are also highly correlated with corporate profit performance. While CFOs are commensurately leveraged on the upside, they appear to be better insulated from poor performance than their CEO colleagues. CFO median bonuses increased 23 percent among companies in the top quartile as median net income rose over 77 percent. However, median bonuses for CFOs in the bottom quartile fell just 52 percent at companies where the median net income dropped by 39 percent. Only 26 percent of the CFOs in the bottom quartile did not receive any annual incentive. (Data differs slightly for CEOs and CFOs due to the inclusion of only those executives who have held their positions for at least two years.)
As expected, the study found that base salaries, unlike incentive compensation, generally reflect executive tenure and marketplace movement, rather than performance. The median CEO salary for the entire group was $715,400, representing an increase of 4.5 percent in 2007. No correlation was found between CEO salary increases and company performance, although there is an inverse relationship between company size and salary increase. For CEOs at companies with revenues greater than $20 billion, the median increase was 2.9 percent, or $42,200, on median salaries of $1.3 million. Among this same group of companies, 71 percent of CEOs receive base salaries greater than $1 million. But at companies with revenues of less than $1 billion, the median increase was at the higher rate of 5.2 percent, or $24,800 on median salaries of $465,000.
The median salary for CFOs was $355,300, representing an increase of 7 percent over 2006. The study found no correlation between the size of CFO salary increase and the size of the company or its profit performance. Median CFO salaries ranged from $246,300 at companies with revenues below $1 billion to $600,000 at companies with revenues greater than $20 billion.
|
|
|
|
