CEOs of larger public companies not only receive greater total compensation for their responsibilities, they have more “skin in the game” than their counterparts at smaller publicly traded companies, according to a report on executive compensation released today by The Conference Board. The report precedes a release of a 2008 study, which reveals that CEOs of the largest 10% of publicly traded companies earn just over 48% of their total compensation in at-risk compensation, in the form of stock and stock options, as opposed to roughly 18% for the CEOs of the smallest public companies.
The release of the study follows the first full-year of the new SEC disclosure rules around executive compensation, which require public companies to describe the compensation packages of their top executives to shareholders via proxy statements. In addition to the correlation between greater responsibility for revenue and increased stock-related compensation, the report also reveals a number of other interesting trends about the compensation packages of top executives:
• The highest median total compensation of $3.9 million went to CEOs in the utilities, food and tobacco, and insurance industries with CEOs in the construction industry coming in right behind the CEOs in the leading industries. CEOs in the financial services industry ranked last, at $733,000 in median total compensation, among the top executives in the 22 industries surveyed.
• The highest median cash compensation, which is described as a total of annual salary, bonus and non-equity incentives, was earned by the CEOs in the insurance industry at $1.6 million.
• CEOs of the smallest companies are holding 11 times their annual salary in stock and stock options versus their counterparts in the largest 10% of companies, who are holding over 80 times their annual salary in company stock and stock options.
The authors of the survey note that CEOs of larger companies accumulate stock and stock options over time giving them more “skin in the game” and that the practice of granting more stock-related compensation should align CEOs with the goals of shareholders. The CEOs of smaller companies may have the ability to affect results more quickly, via new products or marketing processes, thus using salary as an incentive for those CEOs might be more appropriate than relying on stock appreciation.