CEO Financial Fortunes Drop Sharply, Watson Wyatt Proxy Analysis Finds
May 13 2009 - 12:29PM
PR Newswire (US)
Economic Downturn Leads to More Than $13 Billion Decline for 80
CEOs Studied WASHINGTON, May 13 /PRNewswire/ -- Chief executive
officers at many of the nation's largest corporations saw portions
of their financial fortunes drop sharply last year as the financial
crisis and slumping stock market resulted in smaller annual bonus
payouts, diminished ownership values and reduced value for equity
holdings, according to an analysis of proxy statements conducted by
Watson Wyatt, a leading global consulting firm. The 80 CEOs that
Watson Wyatt analyzed experienced an aggregate decrease of $13.4
billion in levels of realizable pay (measured here by annual
bonuses paid plus value of company ownership plus value of
outstanding equity awards) in 2008. The typical CEO saw a decline
of $39 million or 53 percent in value for the year, with a drop in
annual bonuses alone of 30 percent. Shareholders saw a 40 percent
loss on their investments and an overall loss of $2.23 trillion for
the 80 companies. "Clearly, most CEOs at large companies were not
immune to the financial fallout from the economic crisis and stock
market losses of the last year," said Ira Kay, global director of
compensation consulting at Watson Wyatt. "Pay packages will be
realigned to reflect the new economic reality that is currently
unfolding. And while there will be an increased focus on risk and
stock ownership, every board will likely settle on the pay mix that
works best for its industry and company." The 18 CEOs in the
financial industry companies, the largest industry group in the
analysis, collectively lost more than $3.1 billion in value,
largely driven by decreases in the value of company ownership due
to stock price declines in 2008. The analysis also found that
despite a moderate stock market rebound in recent months, the
typical CEO lost an additional 21 percent in equity value in the
first three months of 2009. CEO Financial Fortunes Drop Across
Major Industries in 2008 Aggregate CEO median Median 1-Year % 2008
decline decline (in CEO median Total Return to Industry (in
$millions) $millions) % decline Shareholders (TRS) Health Care
-$202 -$13 -24% -17% Technology -$5,056 -$30 -38% -26% Consumer
-$294 -$25 -45% -27% Materials/Industrials -$1,209 -$42 -59% -40%
Financial -$3,192 -$95 -76% -68% Energy/Utilities -$3,443 -$183
-58% -47% All Industries -$13,396 -$39 -53% -40% "Executive pay and
performance will remain lightning rod issues as shareholders, the
media and Congress continue to scrutinize how companies are
compensating their executives. To be effective, the pay programs of
the future will need to reward top talent without motivating
excessive risk or reaching unwarranted levels when the economy and
the stock market recover," said Kay. The Watson Wyatt analysis
reviewed compensation levels for 2007 and 2008 at the first filers
of the 20 largest companies with complete information available in
each of six broad S&P industries. The industries include health
care, technology, consumer, materials/industrials, financial and
energy/utilities. Companies that were acquired or suffered
bankruptcy during 2008 were included in the analysis. About Watson
Wyatt Worldwide Watson Wyatt (NYSE:WWNASDAQ:WW) is the trusted
business partner to the world's leading organizations on people and
financial issues. The firm's global services include: managing the
cost and effectiveness of employee benefit programs; developing
attraction, retention and reward strategies; advising pension plan
sponsors and other institutions on optimal investment strategies;
providing strategic and financial advice to insurance and financial
services companies; and delivering related technology, outsourcing
and data services. Watson Wyatt has 7,700 associates in 33
countries and is located on the Web at http://www.watsonwyatt.com/
DATASOURCE: Watson Wyatt CONTACT: Ed Emerman, +1-609-275-5162, ,
for Watson Wyatt; or Steve Arnoff of Watson Wyatt, +1-703-258-7634,
Web Site: http://www.watsonwyatt.com/
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