Pay for Performance is Working Early Results Indicate CEO Pay Tied To Corporate Performance In 2010

NEW YORK, March 11, 2011 /PRNewswire/ -- Average CEO total compensation increased +39% in 2010 while average total shareholder return equaled +25% and average net income increased +30%, according to a study of 100 early filers with revenues greater than $1 billion recently completed by executive compensation consultancy Steven Hall & Partners.

"There are three factors contributing to the gains we observed," said Steven Hall, Managing Director of Steven Hall & Partners.  "First, base salaries that were reduced or held constant in 2009 were increased in 2010.  Second, cash bonuses increased +43% as a result of stronger performance.  Finally, we saw a +41% increase in the value of equity compensation granted in 2010.  Although executives will not realize cash gains on these awards until they are vested, they nevertheless provide both retention and a link between CEO pay and performance.  Nearly 80% of the equity awarded in 2010 will only provide value if the stock price appreciates or certain performance goals are met."

The study also confirms that profitability continues to be the key determinant of compensation.  "In instances where profitability increased in 2010, incentive cash compensation increased +53% over 2009 values, versus a -9% decrease among companies with lower profits," added Devin Reilly, also of Steven Hall & Partners.  Furthermore, among the eight unprofitable companies in the study group, CEO total compensation decreased on average by -14%, while increasing +44% for CEOs of profitable companies.

Pay Mix

Equity continues to serve as the primary compensation vehicle for CEOs.  For the 100 CEOs in the study group, equity compensation comprised 43% of total compensation, bonuses and other cash-based incentives represented 35% and base salaries just 22%.

Trends in Pay Elements

Comparing 2010 compensation to that in 2009 for all 100 CEOs in the study group, the study finds that

  • Salaries increased +11%
  • Cash incentive compensation increased +43%
  • Equity compensation increased +41%
  • Total compensation increased +39%
  • Revenues were up by +15%
  • Net Income was up by +30%
  • Total shareholder return was +25%

About the Study

The study analyzed compensation data as disclosed in preliminary or definitive proxy statements filed in 2011 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 sehall@shallpartners.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.

SOURCE Steven Hall & Partners




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