December 2, 2011
New ISS Paper on Pay Disparity
– Broc Romanek, CompensationStandards.com
Subodh Mishra of ISS blogged this a few days ago:
ISS Corporate Services recently released a white paper, “Bridging the Pay Divide: Trends in C-Suite Pay Disparities.” This white paper examined the total direct compensation for the top five highest-paid executives at Russell 3000 companies in fiscal years 2008, 2009, and 2010. Total direct compensation is defined as the sum of pay received from: base salary, bonus, non-equity incentive plan compensation, stock awards, option awards, change in pension value and nonqualified deferred compensation earnings, and all other compensation, such as perquisites.
Here are some of the paper’s key takeaways:
– The gap between total direct compensation of the CEO and next highest paid named executive officers has closed dramatically since fiscal 2008.
– As of fiscal 2010 and where the CEO is the top paid executive, the pay gap is most pronounced at large-cap companies, where CEOs received, on average, 2.4 times the pay of the next highest paid executive officer. By comparison, the multiple is 2.1 times at Russell 3000 companies below the S&P 1500.
– Across sectors, companies in the materials sector saw the largest pay spread with an average multiple of 2.4 in fiscal 2010, while, conversely, telecommunications firms had an average multiple of just 1.9.
– The prevalence of “excessive” multiples between the CEO and next highest paid executive, defined here as three or more, declined markedly from fiscal 2008 when evidenced at more than half of all Russell 3000 companies.
– Across indices, the CEO’s share of total compensation of the top five earning officers dropped radically from fiscal 2008 to 2009, though has held steady into 2010 with CEOs claiming 42.2 percent of the total pay pie across the full Russell 3000 universe.