Posted by Gerard Leider on June 21, The CEOs of the largest U. Inthe introduction of regulations providing shareholders the right to an advisory vote on executive compensation—better known as Say on Pay—brought increased scrutiny of CEO pay packages in the wake of the financial crisis and Dodd-Frank legislation. CEO pay is increasingly at-risk, and variable components dependent on meeting or exceeding performance goals now comprise a larger share than they once did.

In that time, the U. This report also visualizes shifts in how companies award CEO pay. Changes to CEO base salary and annual cash bonus payouts were relatively stagnant compared to the value delivered by equity-based compensation i.

As equity-based pay awards have increased, so has the proportion delivered in performance-based awards—contingent on meeting or exceeding performance goals set by boards of directors. Join Equilar and Meridian Compensation Partners for a webinar that takes a look inside the newest CEO pay data reported in proxy statements, and learn from a lively discussion that looks beyond the reported pay figures at the regulatory requirements, governance issues and changing market practices.

Fiscal years are defined by proxy filing dates between May 1st of the fiscal year and April 30th of the following calendar year. Total compensation is defined as the sum of summary compensation table SCT reported salary, bonus, non-equity incentive plan compensation, stock awards, option awards and all other compensation—change in pension value and nonqualified deferred compensation was excluded to omit changes in actuarial value.

Performance-based equity refers to all equity compensation vehicles linked to the achievement of a performance metric. Industry sectors are based on Yahoo! Finance classifications—conglomerates were excluded from charts throughout the report due to small sample size, but were included in the overall figures.

The narrative portion of this report identifies trends in how companies award CEO pay as they are required to disclose it to the SEC. Meridian Compensation Partners has offered independent commentary to provide color and context to nuances on how those compensation awards are structured and eventually paid to CEOs.

Median reported total compensation increased in each year of the study.

Reported base salary and awarded stock grants both increased in median value in each of the past five years, while stock option grants decreased in value at the median over that time period. Equity comprised an average The percentage of companies offering time-based options decreased during that time from The largest changes as a percentage of total compensation occurred at the lower end of the pay scale.

From topay at the 25th percentile saw the largest increase at 6. When comparing proxy-reported total compensation, it is important to realize that this number represents a combination of actual cash payouts impacted by company or individual performance and a long-term grant date accounting value.

When looking at CEO compensation, there are two ways to frame it. Typically, growth in target compensation is a reflection of market competitive norms, job complexity, risk profile and retention efforts, while actual pay is a reflection of company and industry performance.

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While overall reported CEO pay rose at the median from toit was not universal across industries. That said, growth in the healthcare sector did slow from and levels when it increased 9. Median reported CEO pay saw the largest changes in the basic materials and financial sectors.

The former was The financial sector behaved differently, when pay in was 9. If the company is growing and performing well, which has been the case for most healthcare and technology companies in the recent past, then in turn compensation levels both target and actual compensation should be higher.

A second reference point that should be considered when thinking about compensation growth at both the technology and healthcare industries is that both of these industries have been particularly acquisitive, leading to growth in company size and complexity through both acquisition and organic growth.

In the end, these industries have grown at a greater pace than general market and often into larger organizations with larger revenues, global footprints and company structure complexities. Higher compensation can be expected in these situations. Large fluctuations for other sectors are reflections of industry performance.

Median pay as defined by the summary compensation table has fluctuated as a result of the actual payouts on the annual bonus, long-term cash plans and grant date opportunity value of the long-term incentive LTI awards.

Keep in mind the grant date value for options is impacted by Black-Scholes value that incorporate stock price volatility, which is low against historical norms for many industries. Furthermore it is important to recognize the substantial decline in basic materials valuations, due to price declines in commodities, especially oil.

Stock award grant values increased over the past five years and often comprise a majority of CEO pay. The preference for stock awards is due in part to the residual impact of accounting rule changes for expensing equity in and the push to align executives with shareholders through equity ownership.

The rigorous alignment of CEO pay with company performance by making performance stock awards contingent on performance results served as a strong influence in the wake of Dodd-Frank, Say on Pay and proxy advisor pay-for-performance guidelines. In addition, the required Say on Pay vote has put greater scrutiny on executive compensation. Shareholders and proxy advisors have taken the position that a significant portion of equity awards should be performance-based, many of whom consider stock awards more effective than options to stock market data for metastock this goal, resulting in a decrease in median value of options awards.

Changes to other pay components of CEO pay at the median have been less dramatic over the past five years. The growth in median base salaries awarded to CEOs remains minimal, and compensation awarded in the form on bonuses has fluctuated slightly, showing a lower value between andhigher in both andbefore buy maingear shift super stock again in Other compensation, including benefits and perquisites values, has remained relatively steady over the five-year study period overall while fluctuating slightly from year to year.

We need to be careful when we define a component of pay as stock awards similar to what is discussed in the summary compensation table. There are two types of stock awards—time-vested and performance-vested—and both have grown refer to maker cashiers check prevalence for different reasons.

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Time-vested equity, typically referred to as restricted stock or RSUs, takes runescape best member way to make money a primary goal of talent retention given the lack of performance required to earn the grant, even in a declining market. These awards will change in value but vest based on the passage of time. Performance equity has substantially increased in prevalence as a result of shareholder demand to align CEO compensation with company performance.

Another contributing performance-vested stock options and interest alignment to the growth of performance equity is that investor advisory firms like ISS or Glass Lewis do performance-vested stock options and interest alignment consider stock options a performance-based LTI vehicle. Inequity remained the largest component of compensation for CEOs, and comprised the majority of compensation across all sectors.

Cash was given greater weight in the industrial goods and financial sectors. The starkest difference between the weighting of cash versus equity in compensation structure is seen in the basic materials, healthcare and technology sectors. Increasing shareholder activism, proxy advisor scrutiny and SEC regulation is affecting CEO compensation structures, including annual cash bonuses.

Pay for performance is becoming a greater priority for public companies, and this is displayed in the shift away how to get yocash in yoville for free discretionary bonus awards to heavy reliance on plan-based annual incentive awards, commonly known as non-equity incentive plan NEIP compensation.

Annual cash bonuses viewed as misaligned with company performance may draw the attention of proxy advisors and, in some cases, result in a recommendation that shareholders vote against Say on Pay. The median value at target—or the amount coinciding with targeted performance goals—increased by 4.

Similarly, the median payout as a percentage of target decreased by roughly ten percentage points, suggesting that economic volatility resulted in lower payouts. Designing appropriate CEO pay packages is all about pay and performance. First, companies need to examine the level of performance-based pay and retention needed. As an example, over the last several years many organizations have reviewed the balance between time-vested equity and performance-based equity.

Second, organizations continue to relook at what metrics are being used for both short- and meaning of swap in forex trading incentive plans.

Profit measures, like operating income and earnings per share EPS and growth metrics such as sales and revenues are the most prevalent when looking at annual bonus plans, while long-term plans tend to focus on profit and return metrics, along with relative total shareholder return TSR.

Lastly, over the last several years given market uncertainty, business volatility and the difficulty of establishing long-term measureable goals, many organizations have moved toward relative performance against a peer group.

The vast majority of companies who have moved toward using relative performance have chosen TSR to align with stock price performance and distributions to shareholders. Bottom line, organizations need to continue to align goal setting as it relates to the payout relationships at, above and below target relative to company performance.

Companies commonly grant discretionary bonuses to their executives during transitions, difficult market conditions, restructuring, or when facing otherwise unusual or challenging obstacles. Discretionary bonuses afford companies the flexibility to complement CEO pay when appropriate, even if the bonus amount may not qualify for deductibility under the U.

Companies generally grant equity awards in the form of time-vesting stock, time-vesting options or performance-based equity. As an illustration, the proxy advisory firm Glass Lewis, which has historically excluded time-vesting stock options from performance-based compensation calculations, actively removed the following text from its Proxy Paper Guidelines in the Guidelines:.

Options are a very important component of compensation packages designed to attract and retain experienced executives and other key employees. Accordingly, we typically vote against caps on executive stock options.

The ongoing shift from time-vesting options to performance-based equity and, to a lesser extent, time-based stock continued in The initial change in equity mix shown in the data started in the mids when FAS R changed the accounting standards for stock options. Following that change options had an accounting expense and the playing field to use stock options, time-vested restricted stock or performance shares from an accounting perspective was leveled.

The more recent changes have been influenced by institutional advisory firms like ISS and Glass Lewis that believe options are not performance-based pay, and the demand by institutional shareholders to build stronger link to company performance and incentive payouts. In addition, as more organizations increase the use of performance awards, the market has also changed the type of goals being used within long-term performance plans.

Relative goal-setting against an industry peer group has grown significantly, especially in designs measuring total shareholder return TSR. Conversely, the prevalence of time-vesting option awards varied substantially across sectors.

Healthcare and utilities represented the high and low ends of the options grant spectrum at Although the share of companies granting only performance awards has increased sincethe use of only a single equity vehicle has gradually declined in prevalence while the use of multiple equity vehicles has increased.

In general, the use of performance shares has increased while options have decreased. For the first time over the sample period, grants of all three award types became the most prevalent equity award mix inwith The shift away from stock options and towards stock in the form of performance awards has been steady over the past four years after the mix of performance-based awards vs. Inthe median equity value mix was As the marketplace evolves, additional pay will likely come in the form of variable equity.

This report was produced by Equilar, with commentary from Meridian Compensation Partners.

CEO Pay Trends Report | Meridian Compensation Partners, LLC | Executive Compensation Consulting

Find more reports from Equilar at Equilar. Meridian provides executive compensation consulting and corporate governance services for publicly traded and privately held corporations. All data, graphs and charts reprinted with permission of Equilar.

Executive Summary The CEOs of the largest U. Meridian Compensation Partners Commentary If the company is growing and performing well, which has been the case for most healthcare and technology companies in the recent past, then in turn compensation levels both target and actual compensation should be higher.

Meridian Compensation Partners Commentary We need to be careful when we define a component of pay as stock awards similar to what is discussed in the summary compensation table. Meridian Compensation Partners Commentary Designing appropriate CEO pay packages is all about pay and performance.

Meridian Compensation Partners Commentary The initial change in equity mix shown in the data started in the mids when FAS R changed the accounting standards for stock options. Meridian Compensation Partners Commentary As the marketplace evolves, additional pay will likely come in the form of variable equity.

More companies are engaging with shareholders to explain how compensation plans and programs operate and how pay design aligns with performance Companies made concerted efforts to improve their communications with shareholders i.