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Exclusive: CEO bonuses are falling fast: study
NEW YORK |
NEW YORK (Reuters) - Annual bonuses for U.S. chief executives are shrinking, though the declines may be cold comfort for shareholders rocked by big stock market declines.
The median total bonus pay for chiefs of 173 large U.S. companies fell 19.1 percent in fiscal 2008 from a year earlier, dropping to $889,715 from $1.1 million, according to new data from compensation research firm Equilar Inc to be released formally on Tuesday.
A similar study a year ago found that CEO bonuses were down 4.5 percent in fiscal 2007 from 2006.
Some companies, such as General Electric Co, have announced they awarded no CEO bonus last year amid declining corporate profits and stock prices. Overall, though, the bonus declines at companies in the study were not as steep as the losses sustained in the benchmark Standard & Poor's 500 index, which slid 38.5 percent for all of 2008.
U.S. companies are under pressure to restrain CEO pay at a time of economic and stock market turmoil, with President Barack Obama and others criticizing what they see as excessive executive payouts, particularly at financial firms accepting government bailout money.
Bonuses can be a lucrative part of a CEO's pay, with critics saying companies often do not adequately tie business leaders' pay to corporate performance.
Many big companies have not yet released 2008 compensation data, which is typically found in the annual shareholder proxy, so the Equilar data only shows early pay trends for the year. Many proxies are expected to be filed in the next few weeks.
Overall, CEO pay for 2008 is expected to be down from 2007, pulled down by lower bonuses. But it is unclear whether the decline will be enough to satisfy those who think CEO pay is too high, Alexander Cwirko-Godycki, Equilar's research manager, said in an interview on Monday.
"If these trends hold, it looks like the declines in the bonuses will be big enough to pull overall compensation down," he said. But "the interesting debate that comes out of these numbers is, will it be enough to make people satisfied that the pay system is working properly?"
The Equilar data covers companies with at least $1 billion in annual revenue and a CEO on the job for at least three years. Companies in the study reported pay data for fiscal years ended between June 30 and December 31, 2008, and payouts include performance-based bonuses and discretionary cash awards.
As the economy worsened in 2008, chiefs at companies with fiscal years closing near the end of the calendar year saw larger bonus declines than CEOs at companies with fiscal years ending earlier in the year, the study found.
Median bonus pay for CEOs at companies with fiscal years ended in June climbed 0.3 percent, while bonuses fell 50.9 percent at companies with fiscal years ended in November, according to Redwood Shores, California-based Equilar.
More companies chose not to pay any bonus last year. The study found that 15.6 percent paid no CEO bonuses in 2008, more than double the 6.9 percent that withheld CEO bonuses a year earlier.
(Reporting by Martha Graybow; Editing by Bernard Orr)
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