Performance Pays: CEOs See Highest Compensation Increases Since the Recession, According to New Korn Ferry Study
May 30 2018 - 8:00AM
Business Wire
- CEOs Rewarded with Cash and Equity for Strong
Corporate Income and Shareholder Returns -
- Median Total Direct Comp for CEOs at Largest
US Companies Rises 8.7 Percent to $13.4 Million -
In an environment of double-digit growth in shareholder return
and corporate income, CEOs at the largest companies in the United
States in 2017 received the highest compensation increases since
the recession.
That is according to the 11th annual CEO Compensation Study by
Korn Ferry (NYSE: KFY). The study examined pay for CEOs at the
nation’s 300 largest public companies. The study included companies
that filed their proxy statements between May 1, 2017 and April 30,
2018.
Median total direct compensation (TDC) for CEOs increased 8.7
percent to $13.4 million. That’s double last year’s 4.2 percent
increase in TDC and is the highest percentage increase since 2010,
the first year of recovery from the Great Recession.
While year-over-year base salaries remained relatively flat,
with a 1.5 percent increase to a median of $1.3 million, a large
percentage of the TDC increase came from performance-based
compensation growth:
- Annual bonuses were up 4.1 percent
- Long-term incentive value (LTIs) were
up 7.4 percent
When considering the mix of LTIs, performance awards (equity and
cash) make up the largest percentage at 56 percent, which is the
biggest share of the LTI mix ever recorded in the study. Stock
options / SARs made up 20 percent of LTIs and restricted stock
accounted for 24 percent.
“In years past, we’ve seen LTI increases but not bonus
increases. However, this year we are seeing increases in both
areas,” said Donald Lowman, Korn Ferry Executive Pay and Governance
Practice Leader for North America. “Even with the anticipation of
the CEO pay ratio disclosure mandate, so far we haven’t seen it
dampen organizations’ willingness to pay for performance, including
strong shareholder value and net income increases.”
During the period studied, total shareholder return (TSR) was up
17.8 percent. Net income was up 12.6 percent, which is the
strongest since 2011.
Looking to next year, Korn Ferry expects changes in the mix of
CEO TDC, due to significant changes to the executive compensation
deduction rules in Section 162(m) of the Internal Revenue Code.
“Much will depend on each organization’s financial performance
during the coming year, but with the changes in the tax rules
governing executive compensation, we expect we will see slightly
higher increases in base salaries than in recent years, and that
base salary will represent a larger share of the overall mix of TDC
for the CEO,” said Lowman.
About the Study
The 11th annual study, which is conducted by Korn Ferry (NYSE:
KFY), examined all forms of pay for CEOs at the 300 largest public
companies in the United states. The study included companies that
filed their proxy statements between May 1, 2017 and April 30,
2018. Median revenues for the sample 300 were $18.7 billion.
About Korn Ferry
Korn Ferry is a global organizational consulting firm. We help
companies design their organization – the structure, the roles and
responsibilities, as well as how they compensate, develop and
motivate their people. As importantly, we help organizations select
and hire the talent they need to execute their strategy. Our
approximately 7,000 colleagues serve clients in more than 50
countries.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20180530005540/en/
Korn FerryTracy Kurschner,
612.309.3957Tracy.Kurschner@kornferry.com
Korn Ferry (NYSE:KFY)
Historical Stock Chart
From Mar 2024 to Apr 2024
Korn Ferry (NYSE:KFY)
Historical Stock Chart
From Apr 2023 to Apr 2024