CEOs Bask in Stocks’ Banner Year; Average Pay Rises to $4.37 Million

Belt-tightening has yet to reach the top offices of corporate America, according to a survey released Monday that found the average compensation of chief executives at major companies jumped 23% in 1995 to $4.37 million.

In a year when 3.26 million Americans were fired and the Dow Jones industrial average hit a record high 69 times, the nation’s corporate chieftains were rewarded with annual bonuses and stock option grants that totaled 77% of the CEOs’ pay.

That’s because executives have succeeded in convincing their boards that their pay should skyrocket when corporate stock prices rise, said Diane Posnak, managing director of Pearl Meyer & Partners, which conducted the survey.

“The risk-reward performance quotient paid off in spades last year, as most American companies cleared virtually all financial hurdles with room to spare,” Posnak said. “The executives who led these companies are getting paid for the results.”

The consulting firm queried 35 service and industrial companies with average revenue of $21 billion. It found that CEO base salaries at the companies increased to $991,300, a 4% jump over the 1994 salary of $950,700.

Rising corporate profits, driven by lower costs associated with a smaller work force, are one reason the stock market has been rising so fast. That’s why there’s a relationship between fired Americans and $4.4-million-a-year corporate executives.

“Chief executives are doing what they can to be more efficient, and one way to do it is to cut costs,” Posnak said.

The average stock option was valued at $1.52 million, a 45% increase over 1994’s $1.05 million.

The average bonus, which was paid in 1995 for performance in 1994, was $1.22 million, a 39% increase over the previous year.