IT CEO Pay Down -4% Among Early Filers: Both Short- and Long-Term Incentives Decreased

IT CEO Pay Down -4% Among Early Filers: Both Short- and Long-Term Incentives Decreased

May 2 2013

CoverIn 2012, median CEO total compensation among companies in the IT sector decreased   -4% compared to 2011 levels due to decreases in short- and long-term incentive compensation.  Compared to 2011, base salaries increased +3%, consistent with growth among the broader market, while bonus payouts, a barometer for performance in the most recent year, fell by -11% and long-term compensation decreased -4%.  These decreases in short- and long-term incentives appear to be driven by sub-par annual performance results, particularly in the Semiconductor sub-group.  Conversely, when we isolate the Software and Services sub-group, we see that financial performance results were up and median CEO total compensation increased +7%.  These findings are based on a study of 89 early filers with revenues greater than $50 million recently completed by executive compensation consultancy Steven Hall & Partners.

Among the companies studied, the majority of CEO compensation is delivered through incentive-based pay, comprising 73% of total compensation, with long-term awards and short-term bonuses representing 57% and 16%, respectively.  Base salaries, the fixed compensation element, accounted for only 27% of CEOs’ total compensation in 2012.  For purposes of this study, all equity awards are considered incentive compensation.

Total Compensation

  • On an overall basis, total compensation decreased by -4%
    • Total compensation decreased at 54% of companies reviewed
      • Median decrease for these companies equaled -23%
    • Total compensation increased at 45% of companies reviewed
      • Median increase for these companies equaled +14%
    • There was no change in total compensation at the remaining 1% of companies studied

Pay Mix

SH&P_2013_IT CEO Comp Trends_Early Filers_Data_PayMix
  • Average pay mix for CEOs in the study was 43% cash, 57% equity
    • For companies with revenues greater than $1 billion, the average pay mix was 38% cash and 62% equity

Change in Compensation – By Element

  • Base salary increased +3% at median among IT companies
    • Increase observed in line with trend across industries
  • Annual incentive (bonus) payouts decreased -11% at median
    • Driven by sub-par annual performance results
  • Long-term incentives decreased by -4% among IT companies overall

Long-Term Incentives

  • Particularly in the IT sector, long-term incentives continue to be the focus of most compensation changes
    • Of the companies that utilized performance-based long-term incentives, 62% of those companies increased the value of the 2012 performance award granted to their CEO
    • Of the companies that utilized stock-options, 62% of those companies decreased the value of the 2012 stock option award granted to their CEO

About the Study
The study analyzed compensation data as disclosed in definitive proxy statements filed in 2013 for 89 companies in the GICS information technology sector with revenues greater than $50 million who had CEOs with a minimum tenure of two years.  For additional details regarding the study please contact Steven Hall Jr. at 212-488-5400 or sehall@shallpartners.com.

 

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