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 user 2005-02-22 at 11:05:00 am Views: 51
  • #10453

    Top 50 CEOs got 5 percent pay raise
    Corporate chieftans’ average ’04 compensation: $10.7

    NEW YORK – Chief
    executives at many of the biggest U.S. companies got an average 5 percent raise
    last year to $10.7 million, and more corporate boards concluded that pay for
    performance is the way to go in the executive suite.

    In a survey of 50
    large U.S. companies, restricted stock and other performance-based incentives
    constituted 41 percent of long-term CEO compensation, up from 18 percent in
    2003. The percentage was the highest since 1994.

    Stock options,
    meanwhile, constituted 59 percent of long-term awards, down from 82 percent,
    according to the survey released Thursday by Pearl Meyer & Partners, a New
    York-based pay consultant. Long-term awards, which exclude salaries and bonuses,
    accounted for about 63 percent of total compensation.

    According to the
    survey, the average CEO salary was unchanged at $1.2 million. The average
    long-term incentive, meanwhile, more than doubled to $2.7 million, and the
    average option grant fell 23 percent to $4 million.

    The survey suggests
    that companies are heeding investor demands for tying CEO pay more closely to
    meeting financial goals.

    At the same time,
    it shows that companies are granting fewer stock options, which they must treat
    as an expense under accounting rules slated to take effect in June.
    Historically, the current, more lenient rules allowed many companies to give
    away options without tying them to specific performance goals.

    “Companies are
    adopting plans that focus executives more on improving the financial strength of
    the underlying business for the long haul, rather than riding the option wave,”
    said Ed Archer, a managing director for Pearl Meyer, in an interview.

    A case in point is
    Stanley O’Neal, Merrill Lynch & Co.’s chief executive, whose 2004
    compensation totaled $32 million. Of this amount, $31.3 million was restricted
    stock that doesn’t vest until 2009.

    A year earlier,
    just 40 percent of O’Neal’s $28 million of compensation was restricted, and
    nearly half came as a bonus.

    Archer said
    companies are responding to the “cry among big shareholders to shift away from
    stock options, which they view as a giveaway, and toward performance-based

    He also said
    companies have learned from 2001 and 2002, when falling U.S. stocks left many
    stock options worthless. “That’s a problem because it’s tougher to motivate
    executives when their stock options are under water,” he said.

    The survey group
    comprised service and industrial companies with average annual revenue of $25
    billion. Archer said the sample represented a wide cross-section of