If your dwindling paycheck has you feeling a bit gloomy these days as you struggle to make ends meet, you can always take comfort in knowing that some people are still doing well. Very well indeed. So who's in this group of outliers? Top executives at public companies. Later this week, The Corporate Library, an independent research group that focuses on executive compensation and corporate governance issues, will be shining a light on CEO compensation based on an extensive survey of over 3,300 publicly traded companies. But we have the goods now.
In 2009, CEO base salaries increased an average of 4.5 percent. That's on top of the 4 percent increase in 2008. Indeed, 75 percent of CEOs saw their base salaries go up in 2009. But total compensation, which includes such things as stock options, restricted stock and most typically, perks, went down just over 6 percent last year. Just over half of all CEOs saw their total compensation drop in 2009. The Corporate Library plans to make its findings available in both a webinar and a research report.
The report also zeroes in on the ten highest paid executives in 2008. The lowest paid on the list -- Michael S. Jeffries, CEO of teen clothing retailer Abercrombie & Fitch (ANF) -- made just over $71 million last year, according to the survey. The highest paid on the list -- Steven A. Schwarzman of the Blackstone Group (BX) -- made roughly 10 times that: a whopping $702 million.
At a time when the national unemployment rate is hovering just below 10 percent and many of us who are employed feel lucky to have a job, these numbers may seem hard to grasp and even harder to defend. That's especially true because investors in the companies whose CEOs made the top 10 list didn't fare quite as well as their executives did. Indeed, every single one of these companies lost money for investors last year, though in fairness, 2008 wasn't a great year to own most stocks. One thing that's clear after just a quick skim of the list -- in 2008, it paid to be an energy company executive: Seven of the 10 highest paid CEOs worked in the energy business.
Still, you have to wonder how someone like Abercrombie & Fitch's Jeffries -- remember, he's the lowest paid on the list -- could do so well when $1,000 invested in the company on Jan. 1, 2008, was worth around $300 at the end of the year. As with most top executives, it's all about the stock options and other stock-related compensation.
At just $1.5 million, Jeffries' base salary is essentially the same as it was in 2006 and 2007, when A&F did considerably better for investors, but base salary was just a small piece of his $71 million compensation package. According to The Corporate Library, a generous 86 percent of his earnings were derived through exercising options, cashing in on restricted stock and stock appreciation rights. He also cashed in with a $6 million "stay bonus" that was granted in December 2008 -- basically, a reward for staying on the job.
While options are trickier to pick on, particularly in this case, since Jeffries has grown this company significantly during his 17-year tenure as CEO, the stay bonus makes for a pretty big target. So too does the $1.1 million that A&F spent on Jeffries' personal use of the corporate jet. With a cost of roughly $5,000 an hour, that clocks in at 220 hours spent in the air on personal travel, which, needless to say, translates into an awful lot of vacation time.
Granted, the company was contractually obligated to provide both the stay bonus and the personal use of the private jet under Jeffries employment contract. But there's no law that said that Jeffries was obligated to accept that $7.1 million. Given his hefty total compensation, would it have been that difficult for Jeffries to just say no?
Bonds for Beginners
Learn about fixed income investments.View Course »