Steven Wevodau - Property & Casualty Insurance

Triangle Business Journal

While the recent blows to the U.S. financial markets will most certainly dramatically affect CEO compensation reported in 2009, The Conference Board Top Executive Compensation report released last week shows that changes are already under way.

Some of the key findings of the report include:

• Compensation mix has been reallocated toward stock. Almost all industries show a reallocation of compensation towards stock and away from total cash compensation and stock options.

• Cash may be losing share, but the median CEO still earns more of it. Median cash compensation increased in more than two-thirds of the industries studied, as did total compensation overall. The largest median gainer in cash compensation is the insurance industry (up 34.4 percent, to $1,227,371). The only notable negative is construction, with a 22.4 percent decrease.

• Food and tobacco executives are the top earners. Among the 22 industries represented, food and tobacco shows the highest median CEO total compensation. It tops the list with $6.34 million in median total compensation, and $2.7 million in median total cash compensation, followed by utilities, insurance, and financial services (non-banks).

• CEOs already have plenty of “skin in the game.” Of the largest 10 percent of companies in the sample, the median CEO holds about 100 times of his or her salary in total stock and stock options holdings in the company. Across industry, the largest median multiple (94.4 percent) is seen in the financial services industry (non-banks), with the smallest being commercial banks (23.3 percent).

“Companies must assume their top executives’ compensation will come under greater scrutiny from within and without,” said Linda Barrington, research director for The Conference Board, New York City. “The financial market crisis and U.S. recession have contributed to eroding public trust in business leadership.”

From a macro-perspective, The Conference Board reports that median CEO compensation should fall during a recession if such compensation is based on U.S. revenue performance. However, since the current recession did not start until December 2007, it won’t be until next year’s proxy data that the hypothesis can be best tested.