CEO compensation up by 12.7% in ’07

Increase below previous year's median hike although S&P 500 firms saw bigger gains

PORTLAND, Maine — Chief executive officer total compensation increased a median 12.64% in the past year, according to a study of data from 3,068 U.S. corporations by The Corporate Library.

That increase is below the median increase of 15.98% in the 2006 study by the Portland-based corporate governance and executive compensation research firm.

The study, the fifth annual by The Corporate Library, is based on proxy-statement filings between Oct. 6, 2006, and Oct. 25, 2007, of companies generally in the Russell 3000 index.

For CEOs of S&P 500 companies, the median total pay raise was 23.57%, compared with 16.14% in 2006. (The S&P 500 data cover 353 companies.)

While the study “confirms that the pace of growth” of CEO pay “continues to moderate, the level of increase is still very substantial,” Paul Hodgson, senior research associate of TCL and author of the study, said in a statement.

The median total compensation for all CEOs was $2.079 million; for CEOs of S&P 500 companies, the median was $8.847 million.

In terms of corporate performance, the study examined in detail the 30 highest paid CEOs — all but eight from S&P 500 companies — “to determine whether the shareholder returns they have delivered justify” total compensation they received, ranging between $40 million and $322 million, the statement said.

The “average five-year total shareholder return was well over 100% at these companies, so it is unlikely that shareholders will be unhappy with their performance,” the study said. Only five of the 30 companies with the highest-paid CEOs underperformed peer companies in terms of total shareholder return in the five-year period.

Ray R. Irani, chairman, president and CEO of Occidental Petroleum Corp., Los Angeles, was the highest paid CEO in the study, with total compensation of $322.3 million. Occidental Petroleum’s cumulative total shareholder return in the latest five-year period was 315.19%, outperforming peer companies.

Lawrence J. Ellison, CEO and director of Oracle Corp., Redwood City, Calif., ranked as the second-highest paid CEO with a total compensation of $192.9 million. Oracle’s five-year cumulative total shareholder return was 144.7%, also outperforming peer companies.

Mario J. Gabelli, chairman and CEO of GAMCO Investors (GBL) Inc., New York, received $58.6 million in total compensation, ranked him 14th. GAMCO’s five-year cumulative total shareholder return was -7.1%, underperforming peer companies.

“Mario Gabelli’s pay has nothing to do with the company’s stock price, which has been extremely disappointing for the whole five years,” the study said.

The industries with the highest median CEO total compensation were mining equipment at $19.5 million; petroleum and coal equipment at $10.7 million; computers at $13.5 million; petroleum products at $9.2 million; and residential construction at $7.2 million.