Watson Wyatt Analysis: CEOs See Strong Bonuses

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<p><strong>Washington, D.C. &mdash; April 5</strong><br />Chief executive officers at the nation&rsquo;s largest companies saw their annual bonuses increase 13 percent and the value of their equity-based compensation holdings grow nearly 50 percent last year, according to an analysis of proxy statements conducted by Watson Wyatt Worldwide, a global consulting firm.<br /><br />&ldquo;Corporate America enjoyed a banner financial year in 2006,&rdquo; said Steve Van Putten, Watson Wyatt senior executive compensation consultant. &ldquo;CEO pay moved in step with corporate earnings and stock prices, reflecting the trend toward performance-based compensation.&rdquo;<br /><br />According to the analysis, median annual bonuses for CEOs increased 13 percent to $2.2 million last year.&nbsp; </p><p>At these same companies, the median growth in earnings per share was 14 percent. Earnings per share is a commonly employed performance metric in annual incentive programs.&nbsp; </p><p>Base salaries also grew by 4 percent to a median $1.1 million. </p><p>The proxy analysis is based on 92 large companies whose CEOs remained in their positions in 2005 and 2006.<br /><br />The analysis also found that the median value of CEOs&rsquo; equity compensation, which includes in-the-money stock options and restricted stock awards, increased 48 percent last year to $30.2 million.&nbsp; </p><p>This was fueled in part by the 18 percent increase in total returns to shareholders (TRS) last year.&nbsp; </p><p>For CEOs at high-performing companies (those with a median 30 percent TRS), equity compensation nearly doubled last year to $31.3 million, while CEOs at low-performing companies (7 percent TRS) saw their equity compensation increase by 13 percent to $25.3 million.<br /><br />&ldquo;The correlation between realizable pay &mdash; the value of outstanding long-term incentives granted to executives over a specific time frame &mdash; and company performance remains as strong as ever,&rdquo; said Ira Kay, Watson Wyatt global director of compensation consulting. &ldquo;It is also a good reminder that, because stock options are highly leveraged, even a small increase in stock price appreciation can lead to an increase in value for other CEOs.&rdquo;</p>

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