(The following post originally appeared on ONSecurities, a top Minnesota legal blog founded by Martin Rosenbaum to address securities, governance and compensation issues facing public companies.)
This month’s meeting of the Twin Cities Chapter of the National Association of Stock Plan Professionals featured an excellent webinar by William Gerekand Dana Martin of Hay Group in Chicago. View the webinar, “Executive Pay – A New World Order, or Business As Usual?”, to hear their analysis of the recently released results of The Wall Street Journal/Hay Group 2009 CEO Compensation Study.
The speakers commented that 2009 was an unusual year. Many companies’ performance suffered in 2009 compared to previous years, because of ongoing effects of the economic downturn. However, many companies beat their budgets in 2009 (partly because budgets and targets were set at a more modest level in 2009 than in 2008). Also, total shareholder return increased in 2009 due to some rebound in stock prices from their very low levels at the end of 2008. Even though these factors made it difficult to draw a lot of conclusions, Hay Group had some interesting observations, including the following:
- Total direct compensation to CEOs declined for the second straight year, a first in the history of the study.
- The prevalence of perks declined, and among the companies still providing them, the values of various perks declined dramatically.
- The Hay Group commentators observed a greater use of a “portfolio approach” to long term compensation. They believe compensation committees may be trying to address risk elements of compensation by emphasizing “balance” among compensation elements. However, they pointed out a danger in too much balance, which can water down the message a compensation committee wants to send about the specific types of performance that will be rewarded.