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November 19, 2010
Overall CEO Pay Saw Marginal Decline in 2009
by Robert Kropp
The latest in a series of annual reports by The Corporate Library on executive compensation finds
the greatest decrease in tax gross-ups, or payment by companies of taxes on compensation packages.
The Corporate Library has published
its annual CEO Pay Report, an event of some importance to sustainable investors and other
shareowner activists who have discerned connections between excessive executive compensation in
financial industries and risk-taking in pursuit of short-term profits. In 2010, more than 50
shareowner resolutions addressing executive compensation, or say-on-pay as they are popularly
known, were filed.
Basing its survey on an analysis of more than 2,000 companies
where CEOs were in the role for the past two fiscal years, The Corporate Library reported that
executive compensation "appears to be holding steady," with a median increase in base salaries of
about two percent. "However," the report observes, "Once equity is included – in the form of stock
option profits and vested stock – CEO pay goes into its third year of decline," although the
decrease was marginal.
According to Research Associate Greg Ruel, co-author of the survey,
"Most notable is a clear drop in the number of CEOs who received a tax reimbursement in 2009 as
compared to 2008." The number of CEOs receiving tax reimbursements decreased from 122 in 2008 to 80
in 2009. Furthermore, 51 CEOs who received so-called tax gross-ups, which refer to an arrangement
by which the tax on compensation packages are paid for by the company, in 2008 did not receive one
Fifty-seven percent of the industries surveyed experienced a decrease in
executive compensation in 2009, with the Construction Materials and Construction & Engineering
sectors decreasing the most. The Retail industry sectors—Multiline, Internet & Catalog, and
Specialty—had the largest increases in compensation.
The highest paid CEO in the survey
was Henry Lawrence Culp of Danaher with a total realized compensation of $141,357,486. Culp did not
even appear on last year's list, but in 2009 exercised an award of stock options for a profit of
$84 million. Following Culp on the list of most highly compensated CEOs were Lawrence Ellison of
Oracle and Robert Kotick of Activision Blizzard.
At the end of its 2009 CEO pay survey,
The Corporate Library noted, "It seems probable that many compensation committees may well take
this opportunity (a recovery in stock prices) to increase annual compensation," and in the
conclusion of this year's survey observed that its prediction had turned out to be accurate.
"However," this year's report concluded, "An even greater potential impact on CEO compensation is
around the corner for the 2011 proxy season since that will be the first year that many companies
face an advisory vote on executive compensation."
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