Total compensation of CEOs at the largest U.S. corporations rebounded strongly in 2010, rising a median 9%, according to an analysis released Tuesday of proxy statements by Towers Watson.
In 2009, median total direct compensation decreased 1%. Total direct compensation for both years included total cash compensation plus the grant value of long-term incentives, such as stock options, restricted stock and long-term performance plans.
Total 2010 cash compensation for CEOs, which includes base salary as well as annual and discretionary bonus payments, increased a median 17% vs. a 3% median increase in 2009.
The compensation upswing was largely because of improved company performance and a rising stock market, according to a Towers Watson statement about the analysis. “Annual bonuses were a big factor in the double-digit increase in total cash compensation,” the statement said. Some 72% of CEOs received bonuses in excess of their 2010 target annual bonus. “That's the largest percentage of CEOs to have received more than 100% of their target bonus since 2007,” the statement said.
Only 8% received either no bonus or less than half of their target bonus in 2010, a decline from 21% the previous year.
“Compensation for CEOs has returned to levels we haven't seen since before the economic crisis,” Doug Friske, global head of executive compensation consulting at Towers Watson, said in the statement. “The fact that CEO pay declined or remained flat in years when corporate profits were weak, and then rebounded when profits and the stock market recovered, clearly demonstrates that the pay-for-performance model is working.”
Shareholders also are strongly endorsing say-on-pay proposals at most companies, according to the analysis.
Companies that “have disclosed say-on-pay voting results reported average support of 90% of the votes cast, and 75% of these proposals have won more than 90% support,” the statement said. “Only four companies have failed to win majority support for their say-on-pay proposals to date.”
“Based on our analysis, it appears that most companies are getting it right in terms of their executive pay practices, although many continue to fine-tune their approaches,” Mr. Friske said in the statement. “In the say-on-pay environment, shareholders and other constituents are watching closely. Companies are well aware that circumstances, perspectives and priorities can change quickly, and there's no room for complacency.”