Corporate Profits Up - But Not CEO Pay

Despite average profit increases of +20% and shareholder returns of +37%, CEO pay remained flat in 2009, according to a study of 76 early filers with revenues greater than $10 billion recently completed by executive compensation consultants Steven Hall & Partners.

"On its face, CEO pay increases are nonexistent, driven largely by declines in equity awards as valued on the date of grant. However, the picture may not be all that bleak for these executives. Most of their stock awards were granted in a depressed market, before the recent stock market recovery. They, like shareholders, have benefited from the recent upsurge in stock prices," said James Hughes, Managing Director of Steven Hall & Partners.

"We expect values of grants made to executives in 2010 to rise significantly, reflecting the recent improvement in corporate performance and shareholder value," added Steven Hall, Jr., also of Steven Hall & Partners.

Additionally, the study confirms that profitability continues to be the key determinant of compensation. Among the nine unprofitable companies in the study group, CEO total compensation decreased on average by -20%, while increasing slightly for CEOs of profitable companies (+2%).

Pay Mix

Equity continues to serve as the primary compensation vehicle for CEOs. For the 76 CEOs in the study group, equity compensation made up 56% of total compensation, bonuses and other cash-based incentives, 24%, and base salaries, 20%. CEOs received an additional 25% from changes in pension values, deferred compensation earnings and all other compensation. In an interesting shift this year, CEOs at financial services companies received 23% of total compensation in base salary, the greatest portion among all industries analyzed. Welcome to the new normal.

Trends in Pay Elements

Among all 76 CEOs in the study group, comparing 2009 compensation to 2008, the study finds that:

Salaries remained flat
Cash incentive compensation increased +11%
Equity compensation fell slightly (-4%, but expected to rise in 2010)
Total compensation was flat (-1%)
Revenues were down by -4%
Net Income was up by +20%
Total shareholder return was up by +37%


About the Study

The study analyzed compensation data as disclosed in recently filed proxy statements for 76 companies with revenues greater than $10 billion filing preliminary or definitive proxy statements in March 2010. For additional details regarding the study, as well as industry-specific information, please contact Steven Hall Jr. at 212-488-5400.

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. 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 www.shallpartners.com.