NEW YORK, April 3, 2013 /PRNewswire/ -- In 2012, median CEO total compensation increased +7% over 2011 levels, mirroring growth in net income during the same period. Base salaries continued to increase +3%, consistent with growth in previous years, while bonus payouts, a barometer for performance in the most recent year, fell slightly by -1%. Long-term compensation showed the greatest increase, up +9%, over 2011.
These findings are based on a study of 100 early filers with revenues greater than $1 billion recently completed by executive compensation consultancy Steven Hall & Partners. Among the companies studied, median revenues increased +5% over 2011 levels and median shareholder return for the year was +21%.
The majority of CEO compensation continues to be delivered through incentive-based pay, comprising 82% of total compensation, with long-term awards and short-term bonuses representing 58% and 24%, respectively. Base salaries, the fixed compensation element, accounted for only 18% of CEOs' total compensation in 2012. For purposes of this study, all equity awards are considered incentive compensation.
Pay is also increasingly differentiated by the results of actual performance. Among the 100 companies studied, those posting gains in profits paid bonuses consistent with 2011 levels. However, among the 33 companies with decreasing profits, bonuses were down -8%. In addition, for the 83 companies in the study with positive total shareholder return ("TSR"), bonuses were also flat. But when TSR was down, bonuses were down -23%.
"These early results reinforce the importance Compensation Committees are placing on paying for performance," said Michael Sherry of Steven Hall & Partners. "Gone are the days when Committees rewarded CEOs for maintaining the status quo. Today, failure to deliver improved results translates into diminished annual performance-based pay. Additionally, it appears that failure to deliver gains for shareholders has a meaningful impact on the Compensation Committee's discretionary assessment of overall performance."
Long-term incentive awards are again up on a year-over year basis, with the 2012 gain of +9% similar to the gains observed in last year's study, reflecting increases in grant values during the most recent year as well as payouts from long-term incentives granted in previous years. Interestingly, long-term incentive award values were up even for companies experiencing declining profits or negative TSR in the most recent year.
"Long-term incentives remain the most important way in which Compensation Committees link the interests of executives with those of shareholders," commented Steven Hall Jr., also of Steven Hall & Partners. "Even when annual performance is below expectations, Compensation Committees continue to award long-term incentives to incent improved performance in the future and retain key executives."
Trends in Pay Elements
Among the 100 CEOs in the study group, the study finds that at median:
- Salaries increased +3%
- Bonuses decreased slightly by -1%
- Long-term incentives (defined as equity awards and cash long-term incentive payments) increased by +9%
- Total compensation increased +7%
Among the same companies over the same period, at median:
- Revenues grew by +5%
- Net Income increased by +7%
- Total shareholder return was up by +21%
About the Study
The study analyzed compensation data as disclosed in definitive proxy statements filed in 2013 for 100 companies with revenues greater than $1 billion who had CEOs with a minimum tenure of two years. For additional details regarding the study please contact Steven Hall Jr. at 212-488-5400 or email@example.com.
About Steven Hall & Partners
Steven Hall & Partners is an independent executive compensation consulting firm serving as outside counsel to Boards, Compensation Committees and management. The firm focuses solely on executive compensation, Director remuneration and related corporate governance matters. For more information, please visit www.shallpartners.com and follow us on Twitter @SHallPartners.
Steven Hall Jr.
Steven Hall & Partners
SOURCE Steven Hall & Partners