Corporate Governance

Executive Pay Grows Faster Than Revenue

By Fei-Lu Qian

According to a new study of 45 randomly selected publicly traded companies by ERI Economic Research Institute and the Wall Street Journal, executive compensation increased 20.5% from a year ago while revenues just grew 2.8%. Specifically, the study found the average top executive received an increase of overall total compensation of more than $3.1 million from the previous year. This is a stark contrast when the study compared to the past 11 years where revenues of U.S. publicly traded companies grew 93% while the highest paid executive?s compensation only increased by 24.7%.

The study also found that companies are continuing to shift away from stock options to restricted stock awards. ?More corporate boards are tying compensation packages to performance through Incentive Plans, Stock Options, Restricted Stock Awards, and Long Term Incentive Plans,? observed Dr. David Thomsen, Director, ERI Economic Research Institute. For instance, one year ago, the study noted that a company paid its top executive on average $4.16 million in restricted stock, but increased to $5.08 million this month, a surge of 22%. In contrast, the amount designated through stock options has fallen 15.7% from a year ago.

Full post as published by PomTalk on February 20, 2008 (boomark / email).