America’s top CEOs are set for a once-in-a-lifetime pay bonanza.
Most of them got their annual stock compensation early last year when the stock market was at a 12-year low. And companies doled out more stock and options than usual because grants from the previous year had fallen so much in value that many people thought they’d never be worth anything. But stock prices have surged ever since, giving CEOs enormous gains on paper.
“The dirty secret of 2009 is that CEOs were sitting on more wealth by the end of the year than they had accumulated in a long time,” said David Wise, who advises boards on executive compensation for the Hay Group, a management consulting firm.
An Associated Press analysis of companies in the Standard & Poor’s 500 index shows that 90 percent of the stock options given to CEOs last year are now worth more than they were on the day they were granted. For some, the value jumped by a factor of 10 or more.
Overall, the AP analysis found that the median 2009 pay package for chief executives at companies in the Standard & Poor’s 500 index fell by about 11 percent to $7.2 million. That followed a 7 percent decline in 2008 in median pay. The median value is the midpoint in the AP sample, meaning half of the CEOs made more and half made less.
The total doesn’t take into account the increase in value on paper of the stock and the options executives received. The median pay only reflects the value that companies must assign to stock compensation when it is initially granted.
Other findings in the AP analysis:
• The highest-paid CEO in 2009 was Yahoo Inc.’s Carol Bartz, who received a $47.2 million compensation package during her first year on the job. Ninety percent of her pay came from stock awards and options that were all granted around the time she was hired in the winter of 2009.
• No financial companies were in AP’s top 10. Three were on the 2008 list. Citigroup Inc.’s Vikram Pandit went from No. 10 in 2008 to the third-lowest-paid CEO in the AP analysis in 2009.
• The median value of performance-based cash bonuses rose 19 percent, making it the fastest-growing component of executive pay in the AP sample.
CEOs generally had to meet goals for profits and stock returns in 2009 to receive the bonuses. Some companies made that easy. In early 2009, as the stock market was still falling and the economy was in a deep recession, many companies lowered the bar on the benchmarks for profit and stock returns. As profits began to improve, many executives easily beat the stripped-down goals.
