Excellent Year for Executives

CEO Compensation Rose Nearly 17%

NEW YORK, June 18

After dipping in 2001, take-home pay for chief executives at some of the largest U.S. companies swelled last year, driven by fatter bonuses and bigger payouts from long-term incentive plans, a new study shows.

Among the 1,019 public companies studied, the median bonus for chief executives in their posts in both 2001 and 2002 increased about 9 percent, to $451,000. Long-term incentive payouts, meanwhile, nearly doubled, from a median value of around $500,000 in 2001 to over $900,000 in 2002, according to the study, conducted by the Corporate Library, an independent research group, for release today.

Total cash compensation in 2002, including salary, bonus and other direct payments, rose nearly 17 percent, to a median of about $1.2 million, in 2002. The median figure represents the point at which there are an equal number of chief executives above and below.

The bigger salary and bonuses in 2002 came in a year when corporate profits continued to stagnate and the Standard & Poor's 500-stock index, a broad indicator of the market, dropped 23 percent.

To some extent, a revival in cash-based pay was to be expected. The economy, and with it corporate America, did a little better in 2002 than in terror-scarred 2001. And stock options, the biggest component of executive pay in the go-go 1990s, have become less attractive because of the stock market doldrums since 2001.

But the new study also concludes that many measures of executive pay were higher in 2002 than in 2000, the last year of the great technology and telecommunications-driven market boom.

"There was real long-term growth in all areas of compensation, including value realized from long-term incentive pay as well as increases in salaries and bonuses," said Paul Hodgson, senior research associate at the Corporate Library and principal author of the study. "You can't just say it was a recovery year."

The Corporate Library study authors said they did not take into account stock options awarded in 2002 because the potential value is difficult to measure and the real value may not be known for years. Using some widely accepted measures of stock option-award values shows that for many executives they remain an important part of total compensation. A list of highest-paid executives from New York City-based Aon Consulting's eComp Database of all publicly held companies registered with the Securities and Exchange Commission, for example, shows that two former Tyco International executives, L. Dennis Kozlowski and Mark H. Swartz, received options in early 2002 that, at the time, were potentially worth tens of millions of dollars. [For a list of top executive pay packages, with option values included, see the accompanying chart.]

Another form of compensation, long-term incentive plan payouts, made a big difference in pay in 2002 for many chief executives, according to the Corporate Library.