salaries sneak up despite performance
By Demian McLean, Bloomberg News
Monday, Novovember 7, 2005
WASHINGTON - Median pay for U.S. chief executive officers
swelled by 34 percent last year, to $2.4 million, doubling
the rate of growth in 2003 and outpacing an increase in
corporate earnings, a new survey says.
The jump in compensation was driven by restricted stock
awards, exercised stock options and long-term incentives
such as retirement benefits, Corporate Library of Portland,
Maine, reported in its CEO Pay Survey.
"When we talk to our clients one-on-one, their biggest
concern is the disconnect between pay and performance," said
Patrick McGurn, vice president of Institutional Shareholder
Services, the largest U.S. proxy adviser to fund managers.
The group advised funds to withhold approval of
compensation-panel directors at 60 companies this year,
twice as many as last year.
Shareholder proposals to limit pay or more closely link it
to performance have been increasing in the wake of debates
about corporate governance involving companies such as
General Electric Co. and Fairchild Corp.
Federal regulators including Christopher Cox, chairman of
the Securities and Exchange Commission, have said that
executive pay should be reported more clearly so investors
can hold directors accountable.
"While the median base salary in the S&P 500 creeps
inexorably but slowly toward $1 million, all other elements
of compensation increase exponentially," the report said.
CEOs at companies listed in Standard & Poor's 500 Index
enjoyed a 34 percent jump in total compensation, vs. a 28
percent increase for those not in the index.
Median base salaries rose 4.1 percent among the 1,843
executives tracked last year, an increase that was double
the average rise in U.S. wages, Corporate Library reported.
At the 10 S&P 500-listed companies whose CEOs saw the
biggest raises, six had underperformed their peers in
stock-price growth over five years, the report said.
"Had these CEOs received indexed stock options - stock
options whose exercise price rises up or down in line with
the price performance of a chosen peer group - then they
would have made nothing from these stock options," the
In 2004, investors voted on 177 resolutions to limit or
change the way executives are paid, according to a survey by
Georgeson Shareholder Communications Inc.
Those proposals represented 40 percent of all shareholder
initiatives and were triple the number of compensation
proposals filed in 2001.
Jeffrey Steiner, Fairchild Corp. chairman and chief
executive officer, agreed last month to pay $3.76 million to
settle shareholders' lawsuits about his salary and benefits.
The agreement, if approved, would end litigation about
claims that Steiner and other Fairchild board members
violated legal duties to shareholders by approving excessive
salaries and perks for the chief executive and a family
member who works at the company.
Steiner was paid a salary of $2.5 million last year, when
Fairchild ended three years of losses by reporting net
income of $3.36 million, according to Bloomberg data.
In 2004, General Electric reached a settlement with SEC
regarding the company's failure to disclose some of the
details of former CEO Jack Welch's retirement package.
SEC valued the package, which included a New York apartment,
bodyguards and a leased Mercedes-Benz, at $2.5 million a
General Electric agreed to full disclosure of future accords
without saying it committed any wrongdoing or paying a fine.