Top Executives Saw Pay Decline in 2001 as Recession Took Hold
Last year wasn’t just bad for big business. It was bad for big businessmen: Many chief executives at large publicly traded companies saw their annual pay shrink for the first time in more than a decade.
Top company officers of major corporations still raked in millions. But the salaries that spiraled ever higher from the early 1990s through 2000 edged up only slightly in 2001 as recession took hold, compensation experts say.
And there were sharp reductions in the huge year-end bonuses that business leaders customarily receive, causing a drop in overall cash compensation. Some bonuses were eliminated altogether because of poor company performance in a bad economy only made worse by the Sept. 11 attacks.
The compensation picture is emerging in year-end reports that companies are filing with the Securities and Exchange Commission.
It’s the worst year in recent memory for chief executive compensation, according to experts who acknowledge that the executives are still well-rewarded.
“While pay is down, it’s not as if pay is low,” said Robin Ferracone, a partner and senior executive compensation consultant with William M. Mercer Inc. “CEOs aren’t wondering where the next meal is coming from.”
Salaries rose slightly but bonuses were reduced 13% at 100 of the nation’s largest companies, meaning that the combined total annual compensation for chief executives dropped 2.9% in 2001, according to preliminary results of the annual Wall Street Journal/William M. Mercer CEO Compensation Survey.
The full survey, to be released in mid-April, is expected to show similar results. If so, it would be the first decline for CEOs since the survey began in 1990.
Other corporate compensation experts expect steeper declines. Pearl Meyer & Partners, for example, said cash compensation for executives at 200 well-known companies dropped 14% on average for companies that ended their fiscal year by Dec. 31.
Pearl Meyer said average compensation for chief executives came in at $12.5 million for 2001 after factoring in stock options they exercised during the year. That’s down from $12.7 million for 2000.
Companies in industries particularly hard hit by the recession or other factors ended up reducing executive compensation the most.
FleetBoston Financial Corp., which wrote off loans in Argentina, gave Chief Executive Charles Gifford a $992,200 salary, the same as in 2000. His bonus fell from $4.5million to $2.25 million.
Cisco Systems Inc., among the technology firms that suffered badly last year, paid Chief Executive John Chambers $268,000, down from $323,000 a year earlier. He got a $1-million bonus in 2000 but received no bonus in 2001.
Sun Microsystems Inc., another tech giant, gave CEO Scott McNealy a $100,000 salary and no bonus. In 2000, he was paid $104,000 plus a $4.7-million bonus.
