Annual bonuses awarded to chief executive officers climbed by 13 percent last year, to a median $2.2 million, according to a new study by Watson Wyatt Worldwide. In addition, their equity-based compensation holdings grew nearly 50 percent last year, according to the analysis of proxy statements.
The consulting firm noted that the median growth in earnings per share was 14 percent based on the first round of proxies examined this year, which is roughly in line with the growth in the bonuses. Base salaries, on the other hand, grew by just 4 percent, to a median $1.1 million.
“Corporate America enjoyed a banner financial year in 2006,” said Steve Van Putten, a senior executive-compensation consultant at Watson Wyatt, in a statement. “CEO pay moved in step with corporate earnings and stock prices, reflecting the trend toward performance-based compensation.” Watson Wyatt’s study is an early peek at the proxies detailing 2006 pay, which only started to be filed in earnest during the past few weeks. For its analysis, the firm looked at the proxies of 92 large companies whose CEOs remained in their positions in 2005 and 2006.
The firm also found that the median value of CEOs’ equity compensation, which includes in-the-money stock options and restricted stock awards, increased 48 percent last year, to $30.2 million. This was fueled in part by the 18 percent increase in total returns to shareholders (TRS) last year. For CEOs at high-performing companies (those with a median 30 percent TRS), equity compensation nearly doubled last year, to $31.3 million, while CEOs at low-performing companies (7 percent TRS) saw their equity compensation increase by 13 percent, to $25.3 million, according to the report.