THE ANNUAL FORTUNATE 50

With the economy improving, executives see pay increases, bonuses and equity awards again
May 22, 2011 12:00 am

Share with others:

Net income rose 44 percent at the companies Equilar examined, while their market capitalization, which reflects movement in their stock price, rose almost 21 percent.

The Fortunate 50 received average bonus and cash incentive payments of $1.4 million last year, 9 percent higher than the previous year's class. Their equity-based incentives rose 15 percent to an average of $3.2 million. Compensation experts say the increase reflects two things: higher stock prices and the trend to tie more compensation to stock and option awards.


RELATED ARTICLES


Stock options -- which allow executives to capture the gain in stock prices -- were awarded by 71 percent of the companies Equilar analyzed. While they remain a popular incentive tool, compensation consultants said more companies were using restricted stock, which vests over a prescribed period of time, and performance shares, where the number of shares an executive ultimately receives is based on performance targets.

"Lots of companies are tying more of their pay-into-performance shares," Mr. Boyd said.

While the link targets the pay-for-performance companies and shareholders are seeking, there is a flaw in equity-based pay, according to Mel Fugate of Southern Methodist University's Cox School of Business.

Mr. Fugate said that while shareholders have to put their own money at risk by buying stock in order to profit from rising stock prices, executives do not. Nothing comes out of their pockets, and even when shares of their company do not do well, the shares are still worth something to executives, he said.

"Where we have downside risk, they don't. I think that is a fundamental and often overlooked fact," Mr. Fugate said.

Among the 20 companies represented on the Fortunate 50: two (Consol and Matthews International) generated negative returns, including dividends, for shareholders last year. Over the longer haul, 11 produced negative returns over three fiscal years and three (Matthews, Black Box and Federated Investors) generated negative returns over the last five fiscal years.

Len Boselovic: lboselovic@post-gazette.com or 412-263-1941.
First Published 2012-02-13 03:00:57
PG Products