What's the Latest Development?
The top 200 chief executives at America's largest public companies, defined by receiving returns greater than $1 billion, received an average pay raise of 16 percent for fiscal year 2012. That year, their companies' returns rose by an average of 19 percent. "As usual, cash pay for many of the managers pales next to the value of the stock and option grants they received. Median cash compensation was $5.3 million last year, while stock and option grants came in at $9 million. Stock grants are clearly where the action is, and their value can really add up. Equilar’s analysis calculates the median value of stock holdings of these top C.E.O.’s at $51 million."
What's the Big Idea?
While stock options are thought to work better than cash payments to incentive a CEO to work hard for his or her company's board of directors, it is also where substantial disconnect and pay excess occurs. "Far too often, measures used by company boards to evaluate performance are focused on short-term results. They often miss a crucial element that determines long-term success: the ability to innovate. ... Companies that don’t weigh innovation in deciding pay are essentially rewarding the status quo and failing to reward moves to keep a company strong in the long term, including farsighted efforts to invest in research."
Photo credit: Shutterstock.com