After two straight years of declines, annual compensation for CEOs rebounded strongly in 2010, with CEO salaries generally rising across all sectors.
According to the 2011 Preliminary CEO Pay Survey conducted by GovernanceMetrics International (GMI), total realized compensation and annual compensation for top executives increased 28 percent and 18 percent at the median level respectively, albeit still falling short of pre-recession levels. However, cash bonuses for the highest paid CEOs showed a shocking increase, skyrocketing to three times their pre-recession levels.
Governance professionals will no doubt closely examine the reasons for the sharp rise in cash bonuses, in particular to determine whether some of the measures used to properly compensate CEOs for company performance worked effectively or not.
According to the survey, a number of factors contributed to the significant rise in executive compensation. ‘Many companies subject to TARP restrictions increased salaries using cash and salary stock for top executives,’ the report says. ‘Equity granted in the last couple of years at historically low stock prices began to vest in 2010 and executives were able to reap windfall profits from a return to stock price normalcy.’
The report notes that ‘the number and size of cash bonuses also increased as more companies in rebounding industries were able to hit pre-determined financial performance metrics.’ In fact, many companies met or even far exceeded conservative estimates of company performance that were set low due to uncertainty caused by the recession. Those lowered expectations wound up producing mammoth sized payouts to top executives.
The top five highest paid CEOs for 2010 were Robert A Iger (The Walt Disney Company), $54.92 million; George Paz (Express Scripts), $51.52 million; Lew Frankfort (Coach), $49.45 million; Ray R Irani (Occidental Petroleum), $47.10 million and Ralph Lauren (Polo Ralph Lauren), $42.72 million.
