Korn Ferry Analysis Reveals Solid Increase in CEO Compensation at the Nation’s Largest Companies
June 04 2019 - 8:00AM
Business Wire
- Median Total Direct Comp for CEOs at Largest
US Companies Rises 5.8 Percent Year-Over-Year to $13.9 Million
-
Data unveiled today by Korn Ferry (NYSE: KFY) shows strong
compensation growth for CEOs at the nation’s largest companies and
also reveals that solid company performance directly correlates to
the value of CEO compensation packages.
The 12th annual CEO Korn Ferry Compensation Study examines pay
for CEOs at the nation’s 300 largest public companies and includes
companies that filed their proxy statements between May 1, 2018 and
April 30, 2019.
Median total direct compensation (TDC) for CEOs increased 5.8
percent to $13.9 million.
“Despite a year-end blip in the stock market, 2018 was very good
for Corporate America,” said Don Lowman, Korn Ferry practice
leader, Executive Pay and Governance, North America. “Median
revenues for the sample 300 were $20 billion, which is a
year-over-year increase of 7.5 percent. Median net income was $1.8
billion, reflecting an increase of 14.1 percent from 2017. Overall,
companies did well in 2018 and compensation committees rewarded
CEOs accordingly.”
The mix of the CEO compensation (e.g. salary, bonus, long-term
incentives) remained relatively consistent from last year. In
addition, when considering the mix of long-term incentives (LTIs),
performance awards (equity and cash) make up the largest percentage
at 55 percent. Stock options make up 21 percent and restricted
stock account for 24 percent.
Performance Pays
While year-over-year base salaries remained relatively flat,
with a 1.9 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 by a median of
3.9 percent to $2.6 million
- Long-term incentive value (LTIs) were
up by a median of 6.8 percent to $10 million
When looking at long-term performance, Korn Ferry researchers
found strong alignment between 3-year total shareholder return
(TSR) performance and realized LTIs* in 2018. CEOs who ran
companies within the top third of TSR performance received triple
the realized LTI value in 2018 over CEOs at companies in the bottom
third.
2018 realized CEO long-term incentive income vs. 2016-2018
total shareholder return
TSR Ranking
3-Year TSR
Realized CEO LTI Top Third
21.3%
$15 million Middle Third
8.6%
$9.6 million Bottom Third
-5.0%
$5.4 million
“Simply put, CEOs who delivered better TSR are being paid
accordingly, while CEOs whose companies aren’t performing don’t
realize the same level of compensation,” said Irv Becker, Korn
Ferry vice chairman, Executive Pay & Governance. “This shows
compensation committees are designing pay-for-performance packages
that work. Now the focus is on goal setting and results.”
Editor’s Note: all dollar figures and percentages are
medians and are calculated independently. Medians should not be
added to create another data point.
* Realized pay from stock option exercises and the vesting of
restricted stock and performance equity, all granted a number of
years ago.
About the Study
The 12th 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, 2018 and April 30,
2019.
About Korn Ferry
Korn Ferry is a global organizational consulting firm. We help
clients synchronize strategy and talent to drive superior
performance. We work with organizations to design their structures,
roles, and responsibilities. We help them hire the right people to
bring their strategy to life. And we advise them on how to reward,
develop, and motivate their people.
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Media Contact:Tracy
KurschnerTracy.Kurschner@kornferry.com612.309.3957
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