For CEOs at some of the country’s largest organizations, pay increases slowed in 2012, pointing to weaker financial performances among these companies last year, according to a new analysis by Towers Watson.
CEOs’ total pay grew just 1.2 percent in 2012, a drop from the 6.7 percent median increase seen in 2011, the analysis found.
Total pay is defined as base salary; actual annual and long-term cash bonuses; and the grant-date value of long-term incentives stock options, restricted stock and long-term performance shares.
CEOs saw their total pay growth fall because annual bonuses dropped off by a median of 16 percent, the analysis shows. Meanwhile, salary increases went from 3 percent in 2011 to 2.8 percent in 2012, and target long-term incentives jumped 5.6 percent.
According to the analysis, 58 percent of respondents received bonuses at or below target levels, up from 47 percent in 2011. With major slowdowns in sales and earnings, this comes as no surprise.
"The fact that many CEOs saw their bonuses take a significant hit and ... pay was relatively flat suggests the companies and their boards took a conservative approach to pay in 2012," says Todd Lippincott, leader of executive compensation consulting at Towers Watson for the Americas.
Performance-based long-term incentive plans are gaining popularity, the analysis finds, with 44 percent of respondents having implemented these plans.
Forty-one percent of respondents report using total return to shareholders to determine long-term incentive plan awards, up from 18 percent in 2008. This is now the most prevalent performance metric to consider when deciding long-term incentive plan awards. Another 40 percent of respondents base their long-term incentive plan awards on earnings per share.