Growth of Chief Executives’ Pay Levels Off

Growth in chief executives’ compensation flattened out last year because of more activist corporate boards, but it continues to rise much faster than most peoples’ paychecks.

Bonuses and salaries rose 9.4% for top executives last year, according to Gary Lyons, who studies compensation issues at Washington-based Institutional Shareholder Services Inc., while long-term compensation, which includes stock options, rose 13.2%. Both rates are about even with last year’s when adjusted for inflation.

Lyons has already looked at proxies for 157 companies in the Standard & Poor’s 500 index and expects to have data on about 7,000 companies at the end of proxy season in June.

Middle managers aren’t getting the same treatment.

“People at that level are just worried about keeping their jobs, not about salaries going up a lot,” said Bob Ochsner, director of compensation for Philadelphia-based Hay Management Consultants. While Ochsner had no hard data on middle-management pay raises, he said companies’ overall payroll expenses have dropped.

Graef Crystal, editor of a newsletter on executive compensation in Lake Tahoe, Nev., said that in 1975, CEOs at America’s 200 largest companies made 40 times the pay of the average worker. In 1992, top executives’ pay had jumped to 157 times the average worker’s.

Chief executive mega-salaries are still in evidence this year.

Robert Greenhill, chairman and chief executive of Travelers Inc.’s Smith Barney Shearson Inc. brokerage unit got $36.3 million for the six months he worked at the firm last year. Sanford Weill, chairman and CEO of Travelers, earned $26.4 million. Bear Stearns Companies Inc. chief Alan Greenberg raked in $15.9 million.

Lyons said that based on calculations that include a company’s stock performance, the overall stock market performance and competitors’ performance, about 24% of companies overpaid their CEOs, about 3% more than last year.

Those numbers worry some shareholders.

“I’m concerned about compensation in 1993,” said Sarah Teslik, head of the Council of Institutional Investors, a Washington-based trade group of public, private and union pension funds. “I’m afraid that companies have understood that institutional investors don’t care how much executives are paid as long as it is theoretically tied to performance.”