Once again, proxy season has revealed some eye-popping numbers in executive compensation packages, generating heat from shareholders, labor organizations and some analysts who contend the links between CEO pay and performance are frayed.
Among the most-talked about compensation reports this year is the $1.6 billion option package for UnitedHealth Group CEO William McGuire at a time when more than 40 million Americans lack health insurance. Former Exxon CEO Lee Raymond retired with a $400 million package as consumers face soaring gasoline prices.
AFL-CIO members hired a plane to fly over Pfizer's annual meeting in Lincoln, Neb., in April with a banner reading: "Give it back Hank!" -- a reference to CEO Hank McKinnell's $83 million pension plan set to take effect in 2008. McKinnell has already earned $65 million since he became CEO in January 2001. At the time of the meeting, Pfizer shares had dropped 46% in value under McKinnell's watch.
"The press loves this time of year when it can jump in and find a really big number, but I don't think you're going to see any big increases in CEO pay this year," says Wharton accounting professor Wayne Guay. "Over the last 10 years, pay has generally gone up each year -- some years more than others. This year there's not anything unusual."
According to a survey prepared by Mercer Human Resource Consulting for The Wall Street Journal, total direct compensation for CEOs at 350 top corporations grew 16% in 2005. That was down from a 41% increase in 2004, but well over the 3.2% hike in wages and benefits for U.S. workers overall last year.
Median direct compensation, including salaries, bonuses, restricted stock grants, and gains from option exercises and other long-term incentive payments, was $6 million. Pay for CEOs at the 10 businesses with the highest shareholder returns grew by 51.
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