Thursday September 24, 09:22 PM
CEO pay at US firms little changed during turmoil: survey
WASHINGTON (AFP) - Chief executives at US corporations largely maintained their salaries and benefits during the economic and market turmoil of 2008, a survey by a shareholder rights group showed Thursday.
The Corporate Library said its survey of 2,700 publicly traded firms showed median annual compensation for chief executive officers declined by 0.08 percent in 2008.
This indicates "that the link between CEO pay and firm performance remains very weak," said a report from the corporate governance organization.
"While these findings are historic, in that we have never seen a decline in CEO compensation since we began this series of surveys in 2002, if there were ever an argument that pay is fatally divorced from performance then this is surely it," Paul Hodgson, co-author of the report.
"This minimal decline has to be set against the dramatic downturn in the US equity markets in 2008 when the S&P 500 (news) index fell by more than 37 percent. In this context one might expect CEO compensation to decline, but surely by more 0.08 percent."
The report found some 75 percent of CEOs included in the study received a base salary increase in 2008, up from 73 percent in 2007.
Using a different measure, the survey found total realized compensation was down 6.38 percent. This includes the value realized on vesting of shares, options, pensions and deferred compensation.
"CEOs have had many years of benefiting from the whole of the upside of a bull market," said Hodgson.
"But the whole of the downside of the bear market has been severely mitigated by discretionary bonuses, repriced stock options, mega grants of stock and options, negotiating generous new employment agreements, guaranteed bonuses, and 'retention' awards.
"Paraphrasing the words of Mark Twain, rumors of the death of CEO pay have been greatly exaggerated. In fact, far from falling on its face -- like the economy did -- it has barely stumbled in its steady climb."
Hodgson acknowledged that many pay packages for 2008 were based on contracts signed before the crisis but that "there are elements of CEO compensation you expect to react more closely to performance even over the short term, like cash bonuses."
Compensation practices for 2009 remain unclear, according to Hodgson. Some pay levels may be reduced but "now that the economy has started to pick up a little it's also possible for pay to start rising again."
The report comes with Congress and the White House increasingly scrutinizing CEO pay and the Group of 20 examining the question of bonuses and packages for the banking sector.
Hodgson told AFP he supports "say on pay" proposals that would allow shareholders to have a voice in executive compensation but not necessarily government regulation of pay.
"I don't think it's the business of government to legislate compensation although in an oversight role it is not a bad thing," he said.
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