The 50 Highest Paid CEOs

As Performance Drops, So Does Compensation.

By Linda Steffen |   September 2009   |  FROM THE PRINT EDITION

As it turns out, CEO pay is tied to company performance. It is all relative, however, and when companies perform poorly, executives are increasingly seeing their compensation reflect that lack of performance.

In 2008, the total compensation of the top 50 highest paid public company CEOs in Washington dropped 30 percent to $143.1 million as bonus payouts, long-term incentive grant values and other compensation declined significantly. On average, total CEO compensation was $2.9 million, down $1.2 million from 2007.

All components that make up a CEO’s compensation declined in 2008. This large drop in total compensation was driven by a $1,091,630 decrease, on average, in the value of long-term incentives, such as stock option grants or restricted share awards, along with a $63,012 reduction in actual bonus payments and a $31,913 reduction in other income compensation. The drop in long-term incentives awarded can be attributed to a change in the composition of the Top 50 companies, the absence of large one-time equity grants such as occurred in 2007 and a general decline in grant values. Many businesses had disappointing performance in 2008, also resulting in an 11 percent decrease in bonus payments.

Eleven CEOs did not earn any bonus in 2008. The 27 percent decrease in other compensation follows a national trend that is the result of media exposure of executive perks as well as recent federal requirements to disclose such perks in detail (see figs. 1 and 2 below).

Long-term incentives comprised 60 percent of the average CEO’s total compensation, versus 69 percent in the prior year. The composition of long-term incentives changed significantly in 2008 as the trend toward performance-based awards slowed. The portion of total long-term incentives attributable to performance shares decreased to 25.5 percent from 30.4 percent in 2007, but was still up from 13.2 percent two years ago. Although stock options still represent the largest portion of total long-term incentives, they continued a five-year trend of losing ground to other forms, declining to 41.6 percent in 2008 versus 44.8 percent in 2007. Increases in restricted shares offset the declines in performance shares and options, rising to 27.5

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