Human Capital & Careers

CEOs Enjoy Big Jump in Cash Pay

2003 was a rewarding year to be a chief executive of a publicly traded company.
Stephen TaubMarch 30, 2004

A just-released study has revealed that the chief executive officers for S&P 500 companies received median cash compensation last year of slightly more that $2 million, according to Reuters.

Equilar, which analyzes compensation data, examined figures for the 223 companies in the Standard & Poor’s 500 that have already filed their 2003 proxies. Equilar found that CEO’s cash compensation — defined as salary and bonus — rose 17.4 percent compared with the previous year.

The median base salary climbed only 4.1 percent, to $950,000, but the median bonus jumped nearly 20 percent, to $1,056,000.

According to Equilar, however, the median value of long-term incentives — which includes stock-option grants, restricted stock awards, and long-term incentive plan payouts — fell 10.5 percent, to slightly under $5 million.

All told, the median total direct compensation — which includes cash compensation and long-term incentives — declined slightly, to $7,327,472.

Why? Primarily because many companies are aggressively scaling back the award of options to top executives in anticipation of new rules, expected soon from the Financial Accounting Standards Board, that will require that stock options be expensed.

Equilar found that the median grant-date present value of stock options (using the Black-Scholes methodology) plunged 27.5 percent, from $4.83 million in 2002 to $3.5 million in 2003. Among CEOs who were awarded options, the number granted declined by 7.5 percent, from 350,000 in 2002 to 323,824 in 2003.

As companies cut back their option grants, however, many are increasing their awards of other non-cash compensation.

Equilar’s study revealed that the median value of restricted stock awards came to more than $2.6 million in 2003, up a whopping 39.2 percent from the 2002 level of $1.9 million. The percentage of CEOs awarded restricted stock rose to 29.1 percent in 2003 from 26 percent the prior year.

And. for those CEOs receiving a long-term incentive plan payout, the median value in 2003 increased by 120.1 percent, to more than $2.2 million, compared with 2002. The percentage of CEOs receiving these payouts increased to 22 percent in 2003 from 19.7 percent in 2002.

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