October 20, 2009
First CEO Pay Decline in 8 Years of Studies
– Paul Hodgson, The Corporate Library
As I recently blogged, as the S&P 500 index tumbled more than 37% in 2008, CEO compensation barely fell, according to our recent report co-authored by Greg Ruel and myself. Median total annual compensation for the companies included in the study declined by 0.08% in 2008, suggesting that the link between CEO pay and firm performance remains very weak. The report includes data from more than 2,700 public companies, more than any other CEO pay study released so far this year.
Other key findings from the report include:
– The median decrease in total realized compensation was 6.38%, which is still well out of line with the economic downturn. (Total realized compensation includes the value realized on vesting of shares, option value realized, pension/non-qualified deferred compensation earnings and pension pay in the last year.)
– Approximately 75% of CEOs included in the study received a base salary increase in 2008, up from 73% in 2007.
– More CEOs saw declines in realized compensation in 2008 than in 2007 (just over 56% and 40%, respectively).
– Oracle CEO Lawrence Ellison is the only CEO to appear in The Corporate Library’s list of the top ten highest paid CEOs in both 2007 and 2008, having earned approximately $750 million in realized compensation over the period.
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. The pay study was previewed in a webinar – “Big Pay, Poor Performance” – which is still available as a free download; it includes an analysis (not available in the report) of the CEO pay packages of five companies where the pay/performance link was most starkly broken in 2008.
The Corporate Library’s “2009 CEO Pay Survey” is available for $125.