Press Releases

A New Paradigm in CEO Pay
Stock Option Values Plummet as Incentives Rise

New York, February 17, 2005 - Marking an end to an equity era dominated by stock options, a new pay paradigm emerged in 2004, focused on increased use of full-value grants and performance-based incentives, according to a new study by compensation consultants Pearl Meyer & Partners.

Stock options declined sharply compared to a year earlier, down from 51% to 37% of CEO total remuneration, while long-term incentives soared from 11% to 26% of total pay in 2004, according to the firm's annual look at 50 multi-billion U.S. companies. The survey offers a preview of 2004 pay packages that will be reported to shareholders this year.

2004 Pay Levels
CEO total remuneration among the companies surveyed averaged $10.7 million, up 5% from a year earlier. The average value of option grants was $4.0 million, down 23%; long-term incentives more than doubled in value to $2.7 million. Salary was unchanged at $1.2 million. Because bonuses for 2004 are not delivered until early 2005, the year-end reflects 2003 bonus data.

The retreat from options is equally dramatic when looked at as a percentage of total long-term compensation. In 2004, stock options composed 59% of long-term pay, down from 82% a year earlier. Full-value equity (e.g., restricted stock) plus long-term performance awards more than doubled to 41% of long-term pay from 18% in 2003.

About the Analysis
Pearl Meyer & Partners' survey group is comprised of approximately 50 large service and industrial companies with average revenues of $25 billion that participate in the firm's ongoing executive pay study.

About Pearl Meyer & Partners
Founded in 1989, Pearl Meyer & Partners is recognized for its counsel to Board Compensation Committees and senior managements. The firm specializes in the evaluation, design, development and implementation of compensation programs for executives, employees and Boards, as well as issues related to corporate governance. Services also include customized marketplace surveys, organizational development and sales incentives, all supported by strong actuarial and benefits expertise. Headquartered in New York, Pearl Meyer & Partners maintains offices in Atlanta, Boston, Charlotte, Chicago, Houston and Los Angeles.

Pearl Meyer & Partners is a practice of Clark Consulting (NYSE: CLK), a leading publicly traded firm in its field, serving more than 3,800 U.S. companies nationwide with comprehensive advice on the design, financing and administration of compensation and benefit programs.

Back to top