The Association of U S West Retirees



CEO salaries sneak up despite performance
By Demian McLean, Bloomberg News
Arizona Republic
Monday, Novovember 7, 2005 

WASHINGTON - Median pay for U.S. chief executive officers swelled by 34 percent last year, to $2.4 million, doubling the rate of growth in 2003 and outpacing an increase in corporate earnings, a new survey says.

The jump in compensation was driven by restricted stock awards, exercised stock options and long-term incentives such as retirement benefits, Corporate Library of Portland, Maine, reported in its CEO Pay Survey.

"When we talk to our clients one-on-one, their biggest concern is the disconnect between pay and performance," said Patrick McGurn, vice president of Institutional Shareholder Services, the largest U.S. proxy adviser to fund managers.

The group advised funds to withhold approval of compensation-panel directors at 60 companies this year, twice as many as last year.

Shareholder proposals to limit pay or more closely link it to performance have been increasing in the wake of debates about corporate governance involving companies such as General Electric Co. and Fairchild Corp.

Federal regulators including Christopher Cox, chairman of the Securities and Exchange Commission, have said that executive pay should be reported more clearly so investors can hold directors accountable.

"While the median base salary in the S&P 500 creeps inexorably but slowly toward $1 million, all other elements of compensation increase exponentially," the report said.

CEOs at companies listed in Standard & Poor's 500 Index enjoyed a 34 percent jump in total compensation, vs. a 28 percent increase for those not in the index.

Median base salaries rose 4.1 percent among the 1,843 executives tracked last year, an increase that was double the average rise in U.S. wages, Corporate Library reported.

At the 10 S&P 500-listed companies whose CEOs saw the biggest raises, six had underperformed their peers in stock-price growth over five years, the report said.

"Had these CEOs received indexed stock options - stock options whose exercise price rises up or down in line with the price performance of a chosen peer group - then they would have made nothing from these stock options," the report said.

In 2004, investors voted on 177 resolutions to limit or change the way executives are paid, according to a survey by Georgeson Shareholder Communications Inc.

Those proposals represented 40 percent of all shareholder initiatives and were triple the number of compensation proposals filed in 2001.

Jeffrey Steiner, Fairchild Corp. chairman and chief executive officer, agreed last month to pay $3.76 million to settle shareholders' lawsuits about his salary and benefits.

The agreement, if approved, would end litigation about claims that Steiner and other Fairchild board members violated legal duties to shareholders by approving excessive salaries and perks for the chief executive and a family member who works at the company.

Steiner was paid a salary of $2.5 million last year, when Fairchild ended three years of losses by reporting net income of $3.36 million, according to Bloomberg data.

In 2004, General Electric reached a settlement with SEC regarding the company's failure to disclose some of the details of former CEO Jack Welch's retirement package.

SEC valued the package, which included a New York apartment, bodyguards and a leased Mercedes-Benz, at $2.5 million a year.

General Electric agreed to full disclosure of future accords without saying it committed any wrongdoing or paying a fine.