Profit Performance Does Pay

Apr 09, 2008, 01:00 ET from Steven Hall & Partners

    NEW YORK, April 9, 2008 /PRNewswire/ -- Despite widespread condemnation
 and recent stories regarding Chief Executive Officer (CEO) compensation, a
 comprehensive study of over 500 companies by executive compensation
 consultants Steven Hall & Partners finds that most Boards are committed to
 holding CEOs accountable for performance in both good and bad times. In
 depth analysis of more than 500 CEO bonuses reveals that top-performing
 companies, where net income rose 77 percent last year, awarded bonuses that
 were 25 percent higher than the prior year. In contrast, median CEO bonuses
 fell by 73 percent at companies with bottom quartile performance, where the
 median net income dropped by 56 percent. Thirty-two percent of these bottom
 dwellers were sent an emphatic message -- their Boards paid no annual
 incentive at all to their CEOs.
     "It is heartening that these Boards are holding executives' feet to the
 fire. We work with Boards to ensure close correlation between company
 performance and incentive awards, and it appears that these programs are
 working exactly as intended," commented Steven Hall of Steven Hall &
 Partners. "We have come a long way from the old days of 'pay for pulse,'"
 he added.
     Like their CEO colleagues, annual incentives awarded to Chief Financial
 Officers (CFOs) are also highly correlated with corporate profit
 performance. While CFOs are commensurately leveraged on the upside, they
 appear to be better insulated from poor performance than their CEO
 colleagues. CFO median bonuses increased 23 percent among companies in the
 top quartile as median net income rose over 77 percent. However, median
 bonuses for CFOs in the bottom quartile fell just 52 percent at companies
 where the median net income dropped by 39 percent. Only 26 percent of the
 CFOs in the bottom quartile did not receive any annual incentive. (Data
 differs slightly for CEOs and CFOs due to the inclusion of only those
 executives who have held their positions for at least two years.)
     As expected, the study found that base salaries, unlike incentive
 compensation, generally reflect executive tenure and marketplace movement,
 rather than performance. The median CEO salary for the entire group was
 $715,400, representing an increase of 4.5 percent in 2007. No correlation
 was found between CEO salary increases and company performance, although
 there is an inverse relationship between company size and salary increase.
 For CEOs at companies with revenues greater than $20 billion, the median
 increase was 2.9 percent, or $42,200, on median salaries of $1.3 million.
 Among this same group of companies, 71 percent of CEOs receive base
 salaries greater than $1 million. But at companies with revenues of less
 than $1 billion, the median increase was at the higher rate of 5.2 percent,
 or $24,800 on median salaries of $465,000.
     The median salary for CFOs was $355,300, representing an increase of 7
 percent over 2006. The study found no correlation between the size of CFO
 salary increase and the size of the company or its profit performance.
 Median CFO salaries ranged from $246,300 at companies with revenues below
 $1 billion to $600,000 at companies with revenues greater than $20 billion.
     About the Study
     The study examined the cash compensation (salary and annual incentives)
 of CEOs and CFOs who have been in their roles for at least two years in
 relation to corporate profit performance, defined by the change in net
 income, of 522 public companies filing proxy statements in the first
 quarter of 2008.
     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. Prior to forming Steven Hall & Partners in September 2005, the
 firm's principals, Pearl Meyer, Steven E. Hall and Steven Root, served as
 Chair, President and Managing Director, respectively, of Pearl Meyer &
 Partners which they founded in 1989. For more information, please visit

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