Pay-for-performance hits US execs salaries: Study
Washington: Getting shares as part of salary
package has become a bane for American executives who suffered
huge losses in the financial market meltdown last year, says a
According to global consulting firm Watson Wyatt, the
executives in large US companies suffered financial setback
and witnessed a 42 per cent decline in their stock ownership
and bonus payouts last year, as per the 'pay-for-performance'
In aggregate terms, the CEOs analysed in the study lost a
combined USD 53.7 billion-– that comes roughly to USD 55
million for the average CEO-– in 2008, the study said.
"When the economy prospers and the stock market does
well, executives reap the rewards. But when markets decline,
executives also suffer financial setbacks," Watson Wyatt
Executive Compensation Consulting Global Director Ira Kay said
commenting on the findings.
Executives, as part of the pay-for-performace model, are
given stock ownerships and bonus payouts in tune with the
"The total value of CEO stock ownership and outstanding
equity awards and bonus payouts for CEOs decreased by 42 per
cent in 2008, which is larger than the 34 per cent decline
experienced by a typical shareholder at those companies," the
survey further pointed out.
Watson Wyatt's survey is based on public data from 982
companies in S&P 1,500.
The survey also noted that compensation committees
continue to structure CEO pay programs so that firms with
better performance deliver higher pay to their CEOs than low-
Stock markets' recovery this year, however, has mitigated
some of the overall loss incurred in 2008, it pointed out.
"As companies move beyond the financial crisis and start
preparing in earnest for economic recovery, they will be
challenged to develop incentive programs that continue to
attract and retain top talent and motivate and reward superior
performance, yet at the same time respond to external
pressures," Watson Wyatt Senior Executive compensation
consultant Steve Van Putten.
Besides, the survey also found that the value of broad-
based employee stock option grants declined by 17 per cent in
"The realised gains from employee stock option exercises
declined by an average 55 per cent last year, from USD 54
million per company to USD 24 million," Watson Wyatt said.