Executive Cash Compensation Rises 29%

Top executives in the United States received a 28.7 % increase in their average annual cash compensation compared to the same period one year ago, according to the February 2007 Executive Compensation Index figures released by the Economic Research Institute and CareerJournal.com, The Wall Street Journalís executive career guide. These findings are calculated from year-to-date reporting as of February 2007 compared to the year-to-date in 2006.

Excessive executive compensation has suddenly become a hot topic in Washington, D.C. In his recent ìState of the Economyî speech, President Bush criticized lavish salaries and bonuses for corporate executives and issued a warning for corporate boards to step up to their responsibilities and tie compensation packages to performance.

Government should not decide the compensation for America’s corporate executives. But the salaries and bonuses of CEOs should be based on their success at improving their companies and bringing value to their shareholders, President Bush said.

While the average company increased executive base pay by 1.69% over the past 12 months, the average company increased bonuses by 42.1%, resulting in an overall increase in average total executive cash compensation of 28.7% found the February 2007 ERI/CareerJournal.com Executive Compensation Index.

Lawmakers in Congress plan to push legislation to require shareholder approval of executive compensation plans, and a new rule from the Securities and Exchange Commission is forcing companies to provide a simplified summary of top executives’ compensation in their public filings. There is also a bill before the Senate to raise the minimum wage and cap executives’ tax-deferred pay packages at $1 million a year.

îIncome inequality is real and continues to widen,î said Dr. David Thomsen, Director, ERI Economic Research Institute. ìMore and more companies are creating executive compensation packages that are related to performance.î

According to the nonpartisan Congressional Budget Office, the wealthiest 20 percent of households accounted for 45.4 percent of total U.S. income in 1979, but claimed 53.5 percent in 2004. Households in the bottom fifth dropped from 5.8 to 4.1 percent over the same period.

The February 2007 ERI/CareerJournal.com Executive Compensation Index results are:

Base Salaries
For the highest paid executives, the average base salary stands at $1,304,664, compared to February 2006 base salary levels of $1,283,002. This reflects a 1.69% increase in base compensation.

Annual Bonus
For the highest paid executives, the average annual cash bonus is $3,668,324 compared to the prior year cash bonus levels of $2,580,139. This reflects a 42.1% increase.

Total Cash Compensation
For the highest paid executives, the average total cash compensation (base bonus) is $4,972,988 compared to February 2006 total cash compensation of $3,863,141. This reflects a 28.7% increase in total cash compensation over 2006 levels.

Total Cash Compensation Change Since 1997
The February 2007 Average Index of Total Cash Compensation stands at 207.4, using the 1997 level as a base of 100.0. Since 1997, the Total Cash Compensation for the highest paid executives has increased 107.4%.

Compensation and Revenue Changes Since 1997
The Average Index of Corporate Revenue is 221.2, using the 1997 level as a base of 100.0. Since 1997, the Average of Corporate Revenues has increased 121.2%. This compares to the increase of 107.4% in the Index of Total Cash Compensation.

A review of the year-to-year data shows a change in pattern between 1997 and 2007. Prior to 2002, compensation was rising at a faster rate than revenues, but in more recent years, executive compensation is rising more slowly than corporate revenues. The February 2007 Index shows a continuation of this trend as 2007 begins.

The study also clearly illustrates a trend toward keeping base salaries relatively steady and providing additional compensation in the form of bonus payments. The average dollar amount of base salary for the top executives increased only 39.4% from 1997 to 2007, while annual dollar amount of bonuses increased 132.2%.

The Total Cash Compensation Index reflects data from a representative group of 45 publicly traded companies randomly selected from the approximately 6,500 companies that report compensation data to the Securities and Exchange Commission (SEC). The Index has tracked pay for the highest paid executive in this group of companies since 1997.