March 30, 2015
CEO to Executive Chair Transition: Key Compensation Trends
– by Randi Val Morrison
This new Equilar article identifies key compensation trends for CEO-to-executive chair transitions based on a sample of 18 S&P 500 CEOs who made this transition within the past five years.
Here are the key findings:
– Cash remained relatively stable – Cash constituted only 35.7% of the median CEO’s total compensation. The median former CEO could reasonably expect a 30.6% decrease in cash compensation as a result of their transition.
– Equity represented the majority of this decline – Stocks, units, options and stock appreciation rights (SARs) collectively represented 64.3% of the median CEO’s pay. This portion was subject to a median decrease of 72.5%, perhaps due to the waning importance of retention and incentives
– Overall compensation fell as a result of these transitions – A majority (72.2%) of CEOs experienced reductions in overall pay as they made the transition to executive chairman.
Though limited by the sample, the information is helpful, as virtually all benchmarking information publicly available addresses compensation for incoming CEOs rather than newly transitioning executive chairs.